PFDA vs. CAPFDA WHICH MANAGED THE LUCENA FISHING PORT COMPLEX WAS ORDERED BY LUCENA CITY TO PAY REAL PROPERTY TAX ON THE FISHING PORT. LBAA, CBAA AND CTA ALL AFFIRMED THE ORDER OF LUCENA CITY. SC RULED THAT PFDA IS EXEMPT BECAUSE IT IS A GOVERNMENT INSTRUMENTALITY NOT A GOVERNMENT OWNED AND CONTROLLED CORPORATION. BUT PORTIONS OF THE PORT LEASED TO PRIVATE ENTITIES NOT EXEMPT FROM REAL PROPERTY TAX.DOCTRINES:PFDA, NOT BEING A GOVERNMENT OWNED OR CONTROLLED CORPORATION IS NOT SUBJECT TO REAL PROPERTY TAX.The ruling of the Court of Tax Appeals is anchored on the wrong premise that the PFDA is a government-owned or controlled corporation. On the contrary, this Court has already ruled that the PFDA is a government instrumentality and not a government-owned or controlled corporation.WHY PFDA IS NOT A GOCC; PROPERTY OF GOVT INSTRUMENTALITY CANNOT BE SOLD AT PUBLIC AUCTION TO SATISFY TAX DILINQUENCY; In the 2007 case of Philippine Fisheries Development Authority v. Court of Appeals,6 the Court resolved the issue of whether the PFDA is a government-owned or controlled corporation or an instrumentality of the national government. In that case, the City of Iloilo assessed real property taxes on the Iloilo Fishing Port Complex (IFPC), which was managed and operated by PFDA. The Court held that PFDA is an instrumentality of the government and is thus exempt from the payment of real property tax, thus:The Court rules that the Authority [PFDA] is not a GOCC but an instrumentality of the national government which is generally exempt from payment of real property tax. However, said exemption does not apply to the portions of the IFPC which the Authority leased to private entities. With respect to these properties, the Authority is liable to pay property tax. Nonetheless, the IFPC, being a property of public dominion cannot be sold at public auction to satisfy the tax delinquency.x x xIndeed, the Authority is not a GOCC but an instrumentality of the government. The Authority has a capital stock but it is not divided into shares of stocks. Also, it has no stockholders or voting shares. Hence it is not a stock corporation. Neither is it a non-stock corporation because it has no members.The Authority is actually a national government instrumentality which is defined as an agency of the national government, not integrated within the department framework, vested with special functions or jurisdiction by law, endowed with some if not all corporate powers, administering special funds, and enjoying operational autonomy, usually through a charter. When the law vests in a government instrumentality corporate powers, the instrumentality does not become a corporation. Unless the government instrumentality is organized as a stock or non-stock corporation, it remains a government instrumentality exercising not only governmental but also corporate powers.7 (Emphasis supplied)BUT PORTIONS OF THE PORT BEING LEASED TO PRIVATE ENTITIES ARE SUBJECT TO REAL ESTATE TAX.The exercise of the taxing power of local government units is subject to the limitations enumerated in Section 133 of the Local Government Code.9 Under Section 133(o)10 of the Local Government Code, local government units have no power to tax instrumentalities of the national government like the PFDA. Thus, PFDA is not liable to pay real property tax assessed by the Office of the City Treasurer of Lucena City on the Lucena Fishing Port Complex, except those portions which are leased to private persons or entities. (UNDERSCORING SUPPLIED).

Manila International Airport Authority vs. Court of AppealsDoctrine: The term “ports” includes seaports and airports. The MIAA Airport Lands and Buildings constitute a “port” constructed by the State. Under Article 420 of the Civil Code, the MIAA Airport Lands and Buildings are properties of public dominion and thus owned by the State or the Republic of the Philippines.Facts: Manila International Airport Authority (MIAA) operates the Ninoy Aquino International Airport Complex in Parañaque City. As operator of the international airport, MIAA administers the land, improvements and equipment within the NAIA Complex. The MIAA Charter transferred to MIAA approximately 600 hectares of land,including the runways and buildings (“Airport Lands and Buildings”) then under the Bureau of Air Transportation. The MIAA Charter further provides that no portion of the land transferred to MIAA shall be disposed of through sale or any other mode unless specifically approved by the President of the Philippines.The Office of the Government Corporate Counsel issued Opinion No. 061, in which it said that the Local Government Code of 1991 withdrew the exemption for real estate tax granted to MIAA under Section 21 of the MIAA charter. Therefore, MIAA was held to be delinquent in paying its taxes. The City of Parañaque Levied upon the properties of MIAA, and posted invitations for public biddings of MIAA’s properties. The City of Parañaque averred that Section 193 of the Local Government code expressly withdrew tax exemptions from government owned and controlled corporations (GOCCs).Issue: Whether properties of the MIAA are subject to real estate taxes.Held: No. In the first place, MIAA is not a GOCC, it is an instrumentality of the government. MIAA is a government instrumentality vested with corporate powers to perform efficiently its governmental functions. MIAA is like any other government instrumentality, the only difference is that MIAA is vested with corporate powers. As operator of the international airport, MIAA administers the land, improvements and equipment within the NAIA Complex. The MIAA Charter transferred to MIAA approximately 600 hectares of land, including the runways and buildings (“Airport Lands and Buildings”) then under the Bureau of Air Transportation. The MIAA Charter further provides that no portion of the land transferred to MIAA shall be disposed of through sale or any other mode unless specifically approved by the President of the Philippines.

Furthermore, Airport Lands and Buildings of MIAA are property of public dominion and therefore owned by the State or the Republic of the Philippines. Article 419 of the Civil Code provides, The Airport Lands and Buildings of MIAA are property of public dominion and therefore owned by the State or the Republic of the Philippines.The Civil Code provides:ARTICLE 419. Property is either of public dominion or of private ownership.ARTICLE 420. The following things are property of public dominion:(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State, banks, shores, roadsteads, and others of similar character;(2) Those which belong to the State, without being for public use, and are intended for some public service or for the development of the national wealth. (Emphasis supplied)ARTICLE 421. All other property of the State, which is not of the character stated in the preceding article, is patrimonial property.ARTICLE 422. Property of public dominion, when no longer intended for public use or for public service, shall form part of the patrimonial property of the State.No one can dispute that properties of public dominion mentioned in Article 420 of the Civil Code, like “roads, canals, rivers, torrents, ports and bridges constructed by the State,” are owned by the State. The term “ports” includes seaports and airports. The MIAA Airport Lands and Buildings constitute a “port” constructed by the State. Under Article 420 of the Civil Code, the MIAA Airport Lands and Buildings are properties of public dominion and thus owned by the State or the Republic of the Philippines.The Airport Lands and Buildings are devoted to public use because they are used by the public for international and domestic travel and transportation. The fact that the MIAA collects terminal fees and other charges from the public does not remove the character of the Airport Lands and Buildings as properties for public use. The operation by the government of a tollway does not change the character of the road as one for public use. Someone must pay for the maintenance of the road, either the public indirectly through the taxes they pay the government, or only those among the public who actually use the road through the toll fees they pay upon using the road. The tollway system is even a more efficient and equitable manner of taxing the public for the maintenance of public roads.The charging of fees to the public does not determine the character of the property whether it is of public dominion or not. Article 420 of the Civil Code defines property of public dominion as one “intended for public use.” Even if the government collects toll fees, the road is still “intended for public use” if anyone can use the road under the same terms and conditions as the rest of the public. The charging of fees, the limitation on the kind of vehicles that can use the road, the speed restrictions and other conditions for the use of the road do not affect the public character of the road.The terminal fees MIAA charges to passengers, as well as the landing fees MIAA charges to airlines, constitute the bulk of the income that maintains the operations of MIAA. The collection of such fees does not change the character of MIAA as an airport for public use. Such fees are often termed user’s tax. This means taxing those among the public who actually use a public facility instead of taxing all the public including those who never use the particular public facility. A user’s tax is more equitable — a principle of taxation mandated in the 1987 Constitution.The Airport Lands and Buildings of MIAA, which its Charter calls the “principal airport of the Philippines for both international and domestic air traffic,” are properties of public dominion because they are intended for public use. As properties of public dominion, they indisputably belong to the State or the Republic of the Philippines.Being a property of public dominion, the properties of MIAA are beyond the commerce of man.

MIAA vs. CAPetitioner Manila International Airport Authority (MIAA) operates the Ninoy Aquino International Airport (NAIA) Complex in Parañaque City under Executive Order No. 903, otherwise known as the Revised Charter of the Manila International Airport Authority ("MIAA Charter"). Executive Order No. 903 was issued on 21 July 1983 by then President Ferdinand E. Marcos. Subsequently, Executive Order Nos. 9091 and 2982 amended the MIAA Charter.

As operator of the international airport, MIAA administers the land, improvements and equipment within the NAIA Complex. The MIAA Charter transferred to MIAA approximately 600 hectares of land,3 including the runways and buildings ("Airport Lands and Buildings") then under the Bureau of Air Transportation.4 The MIAA Charter further provides that no portion of the land transferred to MIAA shall be disposed of through sale or any other mode unless specifically approved by the President of the Philippines.5

On 21 March 1997, the Office of the Government Corporate Counsel (OGCC) issued Opinion No. 061. The OGCC opined that the Local Government Code of 1991 withdrew the exemption from real estate tax granted to MIAA under Section 21 of the MIAA Charter. Thus, MIAA negotiated with respondent City of Parañaque to pay the real estate tax imposed by the City. MIAA then paid some of the real estate tax already due.On 28 June 2001, MIAA received Final Notices of Real Estate Tax Delinquency from the City of Parañaque for the taxable years 1992 to 2001. MIAA's real estate tax delinquency is broken down as follows:

TAX DECLARATION TAXABLE YEAR TAX DUE PENALTY TOTALE-016-01370 1992-2001 19,558,160.00 11,201,083.20 30,789,243.20E-016-01374 1992-2001 111,689,424.90 68,149,479.59 179,838,904.49E-016-01375 1992-2001 20,276,058.00 12,371,832.00 32,647,890.00

E-016-01376 1992-2001 58,144,028.00 35,477,712.00 93,621,740.00E-016-01377 1992-2001 18,134,614.65 11,065,188.59 29,199,803.24E-016-01378 1992-2001 111,107,950.40 67,794,681.59 178,902,631.99E-016-01379 1992-2001 4,322,340.00 2,637,360.00 6,959,700.00E-016-01380 1992-2001 7,776,436.00 4,744,944.00 12,521,380.00*E-016-013-85 1998-2001 6,444,810.00 2,900,164.50 9,344,974.50*E-016-01387 1998-2001 34,876,800.00 5,694,560.00 50,571,360.00*E-016-01396 1998-2001 75,240.00 33,858.00 109,098.00GRAND TOTAL P392,435,861.95 P232,070,863.47 P 624,506,725.42

1992-1997 RPT was paid on Dec. 24, 1997 as per O.R.#9476102 for P4,207,028.75#9476101 for P28,676,480.00#9476103 for P49,115.006

On 17 July 2001, the City of Parañaque, through its City Treasurer, issued notices of levy and warrants of levy on the Airport Lands and Buildings. The Mayor of the City of Parañaque threatened to sell at public auction the Airport Lands and Buildings should MIAA fail to pay the real estate tax delinquency. MIAA thus sought a clarification of OGCC Opinion No. 061.On 9 August 2001, the OGCC issued Opinion No. 147 clarifying OGCC Opinion No. 061. The OGCC pointed out that Section 206 of the Local Government Code requires persons exempt from real estate tax to show proof of exemption. The OGCC opined that Section 21 of the MIAA Charter is the proof that MIAA is exempt from real estate tax.On 1 October 2001, MIAA filed with the Court of Appeals an original petition for prohibition and injunction, with prayer for preliminary injunction or temporary restraining order. The petition sought to restrain the City of Parañaque from imposing real estate tax on, levying against, and auctioning for public sale the Airport Lands and Buildings. The petition was docketed as CA-G.R. SP No. 66878.

On 5 October 2001, the Court of Appeals dismissed the petition because MIAA filed it beyond the 60-day reglementary period. The Court of Appeals also denied on 27 September 2002 MIAA's motion for reconsideration and supplemental motion for reconsideration. Hence, MIAA filed on 5 December 2002 the present petition for review.7

Meanwhile, in January 2003, the City of Parañaque posted notices of auction sale at the Barangay Halls of Barangays Vitalez, Sto. Niño, and Tambo, Parañaque City; in the public market of Barangay La Huerta; and in the main lobby of the Parañaque City Hall. The City of Parañaque published the notices in the 3 and 10 January 2003 issues of the Philippine Daily Inquirer, a newspaper of general circulation in the Philippines. The notices announced the public auction sale of the Airport Lands and Buildings to the highest bidder on 7 February 2003, 10:00 a.m., at the Legislative Session Hall Building of Parañaque City.A day before the public auction, or on 6 February 2003, at 5:10 p.m., MIAA filed before this Court an Urgent Ex-Parte and Reiteratory Motion for the Issuance of a Temporary Restraining Order. The motion sought to restrain respondents — the City of Parañaque, City Mayor of Parañaque, Sangguniang Panglungsod ng Parañaque, City Treasurer of Parañaque, and the City Assessor of Parañaque ("respondents") — from auctioning the Airport Lands and Buildings.

On 7 February 2003, this Court issued a temporary restraining order (TRO) effective immediately. The Court ordered respondents to cease and desist from selling at public auction the Airport Lands and Buildings. Respondents received the TRO on the same day that the Court issued it. However, respondents received the TRO only at 1:25 p.m. or three hours after the conclusion of the public auction.

On 10 February 2003, this Court issued a Resolution confirming nunc pro tunc the TRO.On 29 March 2005, the Court heard the parties in oral arguments. In compliance with the directive issued during the

hearing, MIAA, respondent City of Parañaque, and the Solicitor General subsequently submitted their respective Memoranda.MIAA admits that the MIAA Charter has placed the title to the Airport Lands and Buildings in the name of MIAA. However, MIAA points out that it cannot claim ownership over these properties since the real owner of the Airport Lands and Buildings is the Republic of the Philippines. The MIAA Charter mandates MIAA to devote the Airport Lands and Buildings for the benefit of the general public. Since the Airport Lands and Buildings are devoted to public use and public service, the ownership of these properties remains with the State. The Airport Lands and Buildings are thus inalienable and are not subject to real estate tax by local governments.

MIAA also points out that Section 21 of the MIAA Charter specifically exempts MIAA from the payment of real estate tax. MIAA insists that it is also exempt from real estate tax under Section 234 of the Local Government Code because the Airport Lands and Buildings are owned by the Republic. To justify the exemption, MIAA invokes the principle that the government cannot tax itself. MIAA points out that the reason for tax exemption of public property is that its taxation would not inure to any public advantage, since in such a case the tax debtor is also the tax creditor.

Respondents invoke Section 193 of the Local Government Code, which expressly withdrew the tax exemption privileges of "government-owned and-controlled corporations" upon the effectivity of the Local Government Code. Respondents also argue that a basic rule of statutory construction is that the express mention of one person, thing, or act excludes all others. An international airport is not among the exceptions mentioned in Section 193 of the Local Government Code. Thus, respondents assert that MIAA cannot claim that the Airport Lands and Buildings are exempt from real estate tax.

Respondents also cite the ruling of this Court in Mactan International Airport v. Marcos8 where we held that the Local Government Code has withdrawn the exemption from real estate tax granted to international airports. Respondents further argue that since MIAA has already paid some of the real estate tax assessments, it is now estopped from claiming that the Airport Lands and Buildings are exempt from real estate tax.The IssueThis petition raises the threshold issue of whether the Airport Lands and Buildings of MIAA are exempt from real estate tax under existing laws. If so exempt, then the real estate tax assessments issued by the City of Parañaque, and all proceedings taken pursuant to such assessments, are void. In such event, the other issues raised in this petition become moot.The Court's RulingWe rule that MIAA's Airport Lands and Buildings are exempt from real estate tax imposed by local governments.First, MIAA is not a government-owned or controlled corporation but an instrumentality of the National Government and thus exempt from local taxation. Second, the real properties of MIAA are owned by the Republic of the Philippines and thus exempt from real estate tax.1. MIAA is Not a Government-Owned or Controlled CorporationRespondents argue that MIAA, being a government-owned or controlled corporation, is not exempt from real estate tax. Respondents claim that the deletion of the phrase "any government-owned or controlled so exempt by its charter" in Section 234(e) of the Local Government Code withdrew the real estate tax exemption of government-owned or controlled corporations. The deleted phrase appeared in Section 40(a) of the 1974 Real Property Tax Code enumerating the entities exempt from real estate tax.There is no dispute that a government-owned or controlled corporation is not exempt from real estate tax. However, MIAA is not a government-owned or controlled corporation. Section 2(13) of the Introductory Provisions of the Administrative Code of 1987 defines a government-owned or controlled corporation as follows:SEC. 2. General Terms Defined. – x x x x(13) Government-owned or controlled corporation refers to any agency organized as a stock or non-stock corporation, vested with functions relating to public needs whether governmental or proprietary in nature, and owned by the Government directly or through its instrumentalities either wholly, or, where applicable as in the case of stock corporations, to the extent of at least fifty-one (51) percent of its capital stock: x x x. (Emphasis supplied)A government-owned or controlled corporation must be "organized as a stock or non-stock corporation." MIAA is not organized as a stock or non-stock corporation. MIAA is not a stock corporation because it has no capital stock divided into shares. MIAA has no stockholders or voting shares. Section 10 of the MIAA Charter9provides:SECTION 10. Capital. — The capital of the Authority to be contributed by the National Government shall be increased from Two and One-half Billion (P2,500,000,000.00) Pesos to Ten Billion (P10,000,000,000.00) Pesos to consist of:(a) The value of fixed assets including airport facilities, runways and equipment and such other properties, movable and immovable[,] which may be contributed by the National Government or transferred by it from any of its agencies, the valuation of which shall be determined jointly with the Department of Budget and Management and the Commission on Audit on the date of such contribution or transfer after making due allowances for depreciation and other deductions taking into account the loans and other liabilities of the Authority at the time of the takeover of the assets and other properties;(b) That the amount of P605 million as of December 31, 1986 representing about seventy percentum (70%) of the unremitted share of the National Government from 1983 to 1986 to be remitted to the National Treasury as provided for in Section 11 of E. O. No. 903 as amended, shall be converted into the equity of the National Government in the Authority. Thereafter, the Government contribution to the capital of the Authority shall be provided in the General Appropriations Act.Clearly, under its Charter, MIAA does not have capital stock that is divided into shares.Section 3 of the Corporation Code10 defines a stock corporation as one whose "capital stock is divided into shares and x x x authorized to distribute to the holders of such shares dividends x x x." MIAA has capital but it is not divided into shares of stock. MIAA has no stockholders or voting shares. Hence, MIAA is not a stock corporation.MIAA is also not a non-stock corporation because it has no members. Section 87 of the Corporation Code defines a non-stock corporation as "one where no part of its income is distributable as dividends to its members, trustees or officers." A non-stock corporation must have members. Even if we assume that the Government is considered as the sole member of MIAA, this will not make MIAA a non-stock corporation. Non-stock corporations cannot distribute any part of their income to their members. Section 11 of the MIAA Charter mandates MIAA to remit 20% of its annual gross operating income to the National Treasury.11 This prevents MIAA from qualifying as a non-stock corporation.

Section 88 of the Corporation Code provides that non-stock corporations are "organized for charitable, religious, educational, professional, cultural, recreational, fraternal, literary, scientific, social, civil service, or similar purposes, like trade, industry, agriculture and like chambers." MIAA is not organized for any of these purposes. MIAA, a public utility, is organized to operate an international and domestic airport for public use.Since MIAA is neither a stock nor a non-stock corporation, MIAA does not qualify as a government-owned or controlled corporation. What then is the legal status of MIAA within the National Government?

MIAA is a government instrumentality vested with corporate powers to perform efficiently its governmental functions. MIAA is like any other government instrumentality, the only difference is that MIAA is vested with corporate powers. Section 2(10) of the Introductory Provisions of the Administrative Code defines a government "instrumentality" as follows:SEC. 2. General Terms Defined. –– x x x x

(10) Instrumentality refers to any agency of the National Government, not integrated within the department framework, vested with special functions or jurisdiction by law, endowed with some if not all corporate powers, administering special funds, and enjoying operational autonomy, usually through a charter. x x x (Emphasis supplied)When the law vests in a government instrumentality corporate powers, the instrumentality does not become a corporation. Unless the government instrumentality is organized as a stock or non-stock corporation, it remains a government instrumentality exercising not only governmental but also corporate powers. Thus, MIAA exercises the governmental powers of eminent domain,12 police authority13 and the levying of fees and charges.14 At the same time, MIAA exercises "all the powers of a corporation under the Corporation Law, insofar as these powers are not inconsistent with the provisions of this Executive Order."15

Likewise, when the law makes a government instrumentality operationally autonomous, the instrumentality remains part of the National Government machinery although not integrated with the department framework. The MIAA Charter expressly states that transforming MIAA into a "separate and autonomous body"16 will make its operation more "financially viable."17

Many government instrumentalities are vested with corporate powers but they do not become stock or non-stock corporations, which is a necessary condition before an agency or instrumentality is deemed a government-owned or controlled corporation. Examples are the Mactan International Airport Authority, the Philippine Ports Authority, the University of the Philippines and Bangko Sentral ng Pilipinas. All these government instrumentalities exercise corporate powers but they are not organized as stock or non-stock corporations as required by Section 2(13) of the Introductory Provisions of the Administrative Code. These government instrumentalities are sometimes loosely called government corporate entities. However, they are not government-owned or controlled corporations in the strict sense as understood under the Administrative Code, which is the governing law defining the legal relationship and status of government entities.A government instrumentality like MIAA falls under Section 133(o) of the Local Government Code, which states:SEC. 133. Common Limitations on the Taxing Powers of Local Government Units. – Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following:x x x x(o) Taxes, fees or charges of any kind on the National Government, its agencies and instrumentalities and local government units.(Emphasis and underscoring supplied)Section 133(o) recognizes the basic principle that local governments cannot tax the national government, which historically merely delegated to local governments the power to tax. While the 1987 Constitution now includes taxation as one of the powers of local governments, local governments may only exercise such power "subject to such guidelines and limitations as the Congress may provide."18

When local governments invoke the power to tax on national government instrumentalities, such power is construed strictly against local governments. The rule is that a tax is never presumed and there must be clear language in the law imposing the tax. Any doubt whether a person, article or activity is taxable is resolved against taxation. This rule applies with greater force when local governments seek to tax national government instrumentalities.Another rule is that a tax exemption is strictly construed against the taxpayer claiming the exemption. However, when Congress grants an exemption to a national government instrumentality from local taxation, such exemption is construed liberally in favor of the national government instrumentality. As this Court declared in Maceda v. Macaraig, Jr.:

The reason for the rule does not apply in the case of exemptions running to the benefit of the government itself or its agencies. In such case the practical effect of an exemption is merely to reduce the amount of money that has to be handled by government in the course of its operations. For these reasons, provisions granting exemptions to government agencies may be construed liberally, in favor of non tax-liability of such agencies.19

There is, moreover, no point in national and local governments taxing each other, unless a sound and compelling policy requires such transfer of public funds from one government pocket to another.

There is also no reason for local governments to tax national government instrumentalities for rendering essential public services to inhabitants of local governments. The only exception is when the legislature clearly intended to tax government instrumentalities for the delivery of essential public services for sound and compelling policy considerations. There must be express language in the law empowering local governments to tax national government instrumentalities. Any doubt whether such power exists is resolved against local governments.Thus, Section 133 of the Local Government Code states that "unless otherwise provided" in the Code, local governments cannot tax national government instrumentalities. As this Court held in Basco v. Philippine Amusements and Gaming Corporation:The states have no power by taxation or otherwise, to retard, impede, burden or in any manner control the operation of constitutional laws enacted by Congress to carry into execution the powers vested in the federal government. (MC Culloch v. Maryland, 4 Wheat 316, 4 L Ed. 579)

This doctrine emanates from the "supremacy" of the National Government over local governments."Justice Holmes, speaking for the Supreme Court, made reference to the entire absence of power on the part of the States to touch, in that way (taxation) at least, the instrumentalities of the United States (Johnson v. Maryland, 254 US 51) and it can be agreed that no state or political subdivision can regulate a federal instrumentality in such a way as to prevent it from consummating its federal responsibilities, or even to seriously burden it in the accomplishment of them." (Antieau, Modern Constitutional Law, Vol. 2, p. 140, emphasis supplied)Otherwise, mere creatures of the State can defeat National policies thru extermination of what local authorities may perceive to be undesirable activities or enterprise using the power to tax as "a tool for regulation" (U.S. v. Sanchez, 340 US 42).

The power to tax which was called by Justice Marshall as the "power to destroy" (Mc Culloch v. Maryland, supra) cannot be allowed to defeat an instrumentality or creation of the very entity which has the inherent power to wield it. 20

2. Airport Lands and Buildings of MIAA are Owned by the Republica. Airport Lands and Buildings are of Public DominionThe Airport Lands and Buildings of MIAA are property of public dominion and therefore owned by the State or the Republic of the Philippines. The Civil Code provides:ARTICLE 419. Property is either of public dominion or of private ownership.ARTICLE 420. The following things are property of public dominion:(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State, banks, shores, roadsteads, and others of similar character;(2) Those which belong to the State, without being for public use, and are intended for some public service or for the development of the national wealth. (Emphasis supplied)ARTICLE 421. All other property of the State, which is not of the character stated in the preceding article, is patrimonial property.ARTICLE 422. Property of public dominion, when no longer intended for public use or for public service, shall form part of the patrimonial property of the State.No one can dispute that properties of public dominion mentioned in Article 420 of the Civil Code, like "roads, canals, rivers, torrents, ports and bridges constructed by the State," are owned by the State. The term "ports" includes seaports and airports. The MIAA Airport Lands and Buildings constitute a "port" constructed by the State. Under Article 420 of the Civil Code, the MIAA Airport Lands and Buildings are properties of public dominion and thus owned by the State or the Republic of the Philippines.The Airport Lands and Buildings are devoted to public use because they are used by the public for international and domestic travel and transportation. The fact that the MIAA collects terminal fees and other charges from the public does not remove the character of the Airport Lands and Buildings as properties for public use. The operation by the government of a tollway does not change the character of the road as one for public use. Someone must pay for the maintenance of the road, either the public indirectly through the taxes they pay the government, or only those among the public who actually use the road through the toll fees they pay upon using the road. The tollway system is even a more efficient and equitable manner of taxing the public for the maintenance of public roads.The charging of fees to the public does not determine the character of the property whether it is of public dominion or not. Article 420 of the Civil Code defines property of public dominion as one "intended for public use." Even if the government collects toll fees, the road is still "intended for public use" if anyone can use the road under the same terms and conditions as the rest of the public. The charging of fees, the limitation on the kind of vehicles that can use the road, the speed restrictions and other conditions for the use of the road do not affect the public character of the road.The terminal fees MIAA charges to passengers, as well as the landing fees MIAA charges to airlines, constitute the bulk of the income that maintains the operations of MIAA. The collection of such fees does not change the character of MIAA as an airport for public use. Such fees are often termed user's tax. This means taxing those among the public who actually use a public facility instead of taxing all the public including those who never use the particular public facility. A user's tax is more equitable — a principle of taxation mandated in the 1987 Constitution.21

The Airport Lands and Buildings of MIAA, which its Charter calls the "principal airport of the Philippines for both international and domestic air traffic,"22 are properties of public dominion because they are intended for public use. As properties of public dominion, they indisputably belong to the State or the Republic of the Philippines.b. Airport Lands and Buildings are Outside the Commerce of ManThe Airport Lands and Buildings of MIAA are devoted to public use and thus are properties of public dominion. As properties of public dominion, the Airport Lands and Buildings are outside the commerce of man. The Court has ruled repeatedly that properties of public dominion are outside the commerce of man. As early as 1915, this Court already ruled in Municipality of Cavite v. Rojas that properties devoted to public use are outside the commerce of man, thus:According to article 344 of the Civil Code: "Property for public use in provinces and in towns comprises the provincial and town roads, the squares, streets, fountains, and public waters, the promenades, and public works of general service supported by said towns or provinces."The said Plaza Soledad being a promenade for public use, the municipal council of Cavite could not in 1907 withdraw or exclude from public use a portion thereof in order to lease it for the sole benefit of the defendant Hilaria Rojas. In leasing a portion of said plaza or public place to the defendant for private use the plaintiff municipality exceeded its authority in the exercise of its powers by executing a contract over a thing of which it could not dispose, nor is it empowered so to do.The Civil Code, article 1271, prescribes that everything which is not outside the commerce of man may be the object of a contract, and plazas and streets are outside of this commerce, as was decided by the supreme court of Spain in its decision of February 12, 1895, which says: "Communal things that cannot be sold because they are by their very nature outside of commerce are those for public use, such as the plazas, streets, common lands, rivers, fountains, etc." (Emphasis supplied) 23

Again in Espiritu v. Municipal Council, the Court declared that properties of public dominion are outside the commerce of man:xxx Town plazas are properties of public dominion, to be devoted to public use and to be made available to the public in general. They are outside the commerce of man and cannot be disposed of or even leased by the municipality to private parties. While in case of war or during an emergency, town plazas may be occupied temporarily by private individuals, as was done and as was tolerated by the Municipality of Pozorrubio, when the emergency has ceased, said temporary occupation or use must also cease,

and the town officials should see to it that the town plazas should ever be kept open to the public and free from encumbrances or illegal private constructions.24 (Emphasis supplied)The Court has also ruled that property of public dominion, being outside the commerce of man, cannot be the subject of an auction sale.25

Properties of public dominion, being for public use, are not subject to levy, encumbrance or disposition through public or private sale. Any encumbrance, levy on execution or auction sale of any property of public dominion is void for being contrary to public policy. Essential public services will stop if properties of public dominion are subject to encumbrances, foreclosures and auction sale. This will happen if the City of Parañaque can foreclose and compel the auction sale of the 600-hectare runway of the MIAA for non-payment of real estate tax.Before MIAA can encumber26 the Airport Lands and Buildings, the President must first withdraw from public use the Airport Lands and Buildings. Sections 83 and 88 of the Public Land Law or Commonwealth Act No. 141, which "remains to this day the existing general law governing the classification and disposition of lands of the public domain other than timber and mineral lands,"27 provide:SECTION 83. Upon the recommendation of the Secretary of Agriculture and Natural Resources, the President may designate by proclamation any tract or tracts of land of the public domain as reservations for the use of the Republic of the Philippines or of any of its branches, or of the inhabitants thereof, in accordance with regulations prescribed for this purposes, or for quasi-public uses or purposes when the public interest requires it, including reservations for highways, rights of way for railroads, hydraulic power sites, irrigation systems, communal pastures or lequas communales, public parks, public quarries, public fishponds, working men's village and other improvements for the public benefit.SECTION 88. The tract or tracts of land reserved under the provisions of Section eighty-three shall be non-alienable and shall not be subject to occupation, entry, sale, lease, or other disposition until again declared alienable under the provisions of this Act or by proclamation of the President. (Emphasis and underscoring supplied)Thus, unless the President issues a proclamation withdrawing the Airport Lands and Buildings from public use, these properties remain properties of public dominion and are inalienable. Since the Airport Lands and Buildings are inalienable in their present status as properties of public dominion, they are not subject to levy on execution or foreclosure sale. As long as the Airport Lands and Buildings are reserved for public use, their ownership remains with the State or the Republic of the Philippines.The authority of the President to reserve lands of the public domain for public use, and to withdraw such public use, is reiterated in Section 14, Chapter 4, Title I, Book III of the Administrative Code of 1987, which states:SEC. 14. Power to Reserve Lands of the Public and Private Domain of the Government. — (1) The President shall have the power to reserve for settlement or public use, and for specific public purposes, any of the lands of the public domain, the use of which is not otherwise directed by law. The reserved land shall thereafter remain subject to the specific public purpose indicated until otherwise provided by law or proclamation;x x x x. (Emphasis supplied)There is no question, therefore, that unless the Airport Lands and Buildings are withdrawn by law or presidential proclamation from public use, they are properties of public dominion, owned by the Republic and outside the commerce of man.c. MIAA is a Mere Trustee of the RepublicMIAA is merely holding title to the Airport Lands and Buildings in trust for the Republic. Section 48, Chapter 12, Book I of the Administrative Code allows instrumentalities like MIAA to hold title to real properties owned by the Republic, thus:SEC. 48. Official Authorized to Convey Real Property. — Whenever real property of the Government is authorized by law to be conveyed, the deed of conveyance shall be executed in behalf of the government by the following:(1) For property belonging to and titled in the name of the Republic of the Philippines, by the President, unless the authority therefor is expressly vested by law in another officer.(2) For property belonging to the Republic of the Philippines but titled in the name of any political subdivision or of any corporate agency or instrumentality, by the executive head of the agency or instrumentality. (Emphasis supplied)In MIAA's case, its status as a mere trustee of the Airport Lands and Buildings is clearer because even its executive head cannot sign the deed of conveyance on behalf of the Republic. Only the President of the Republic can sign such deed of conveyance.28

d. Transfer to MIAA was Meant to Implement a ReorganizationThe MIAA Charter, which is a law, transferred to MIAA the title to the Airport Lands and Buildings from the Bureau of Air Transportation of the Department of Transportation and Communications. The MIAA Charter provides:SECTION 3. Creation of the Manila International Airport Authority. — x x x xThe land where the Airport is presently located as well as the surrounding land area of approximately six hundred hectares, are hereby transferred, conveyed and assigned to the ownership and administration of the Authority, subject to existing rights, if any . The Bureau of Lands and other appropriate government agencies shall undertake an actual survey of the area transferred within one year from the promulgation of this Executive Order and the corresponding title to be issued in the name of the Authority. Any portion thereof shall not be disposed through sale or through any other mode unless specifically approved by the President of the Philippines. (Emphasis supplied)SECTION 22. Transfer of Existing Facilities and Intangible Assets. — All existing public airport facilities, runways, lands, buildings and other property, movable or immovable, belonging to the Airport, and all assets, powers, rights, interests and privileges belonging to the Bureau of Air Transportation relating to airport works or air operations, including all equipment which are necessary for the operation of crash fire and rescue facilities, are hereby transferred to the Authority. (Emphasis supplied)

SECTION 25. Abolition of the Manila International Airport as a Division in the Bureau of Air Transportation and Transitory Provisions. — The Manila International Airport including the Manila Domestic Airport as a division under the Bureau of Air Transportation is hereby abolished.x x x x.The MIAA Charter transferred the Airport Lands and Buildings to MIAA without the Republic receiving cash, promissory notes or even stock since MIAA is not a stock corporation.The whereas clauses of the MIAA Charter explain the rationale for the transfer of the Airport Lands and Buildings to MIAA, thus:WHEREAS, the Manila International Airport as the principal airport of the Philippines for both international and domestic air traffic, is required to provide standards of airport accommodation and service comparable with the best airports in the world;WHEREAS, domestic and other terminals, general aviation and other facilities, have to be upgraded to meet the current and future air traffic and other demands of aviation in Metro Manila;WHEREAS, a management and organization study has indicated that the objectives of providing high standards of accommodation and service within the context of a financially viable operation, will best be achieved by a separate and autonomous body; andWHEREAS, under Presidential Decree No. 1416, as amended by Presidential Decree No. 1772, the President of the Philippines is given continuing authority to reorganize the National Government, which authority includes the creation of new entities, agencies and instrumentalities of the Government[.] (Emphasis supplied)The transfer of the Airport Lands and Buildings from the Bureau of Air Transportation to MIAA was not meant to transfer beneficial ownership of these assets from the Republic to MIAA. The purpose was merely to reorganize a division in the Bureau of Air Transportation into a separate and autonomous body. The Republic remains the beneficial owner of the Airport Lands and Buildings. MIAA itself is owned solely by the Republic. No party claims any ownership rights over MIAA's assets adverse to the Republic.The MIAA Charter expressly provides that the Airport Lands and Buildings "shall not be disposed through sale or through any other mode unless specifically approved by the President of the Philippines." This only means that the Republic retained the beneficial ownership of the Airport Lands and Buildings because under Article 428 of the Civil Code, only the "owner has the right to x x x dispose of a thing." Since MIAA cannot dispose of the Airport Lands and Buildings, MIAA does not own the Airport Lands and Buildings.

At any time, the President can transfer back to the Republic title to the Airport Lands and Buildings without the Republic paying MIAA any consideration. Under Section 3 of the MIAA Charter, the President is the only one who can authorize the sale or disposition of the Airport Lands and Buildings. This only confirms that the Airport Lands and Buildings belong to the Republic.e. Real Property Owned by the Republic is Not TaxableSection 234(a) of the Local Government Code exempts from real estate tax any "[r]eal property owned by the Republic of the Philippines." Section 234(a) provides:SEC. 234. Exemptions from Real Property Tax. — The following are exempted from payment of the real property tax:(a) Real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person;x x x. (Emphasis supplied)

This exemption should be read in relation with Section 133(o) of the same Code, which prohibits local governments from imposing "[t]axes, fees or charges of any kind on the National Government, its agencies andinstrumentalities x x x." The real properties owned by the Republic are titled either in the name of the Republic itself or in the name of agencies or instrumentalities of the National Government. The Administrative Code allows real property owned by the Republic to be titled in the name of agencies or instrumentalities of the national government. Such real properties remain owned by the Republic and continue to be exempt from real estate tax.

The Republic may grant the beneficial use of its real property to an agency or instrumentality of the national government. This happens when title of the real property is transferred to an agency or instrumentality even as the Republic remains the owner of the real property. Such arrangement does not result in the loss of the tax exemption. Section 234(a) of the Local Government Code states that real property owned by the Republic loses its tax exemption only if the "beneficial use thereof has been granted, for consideration or otherwise, to a taxable person." MIAA, as a government instrumentality, is not a taxable person under Section 133(o) of the Local Government Code. Thus, even if we assume that the Republic has granted to MIAA the beneficial use of the Airport Lands and Buildings, such fact does not make these real properties subject to real estate tax.However, portions of the Airport Lands and Buildings that MIAA leases to private entities are not exempt from real estate tax. For example, the land area occupied by hangars that MIAA leases to private corporations is subject to real estate tax. In such a case, MIAA has granted the beneficial use of such land area for a consideration to ataxable person and therefore such land area is subject to real estate tax. In Lung Center of the Philippines v. Quezon City, the Court ruled:Accordingly, we hold that the portions of the land leased to private entities as well as those parts of the hospital leased to private individuals are not exempt from such taxes. On the other hand, the portions of the land occupied by the hospital and portions of the hospital used for its patients, whether paying or non-paying, are exempt from real property taxes.29

3. Refutation of Arguments of MinorityThe minority asserts that the MIAA is not exempt from real estate tax because Section 193 of the Local Government Code of 1991 withdrew the tax exemption of "all persons, whether natural or juridical" upon the effectivity of the Code. Section 193 provides:

SEC. 193. Withdrawal of Tax Exemption Privileges – Unless otherwise provided in this Code, tax exemptions or incentives granted to, or presently enjoyed by all persons, whether natural or juridical, including government-owned or controlled corporations, except local water districts, cooperatives duly registered under R.A. No. 6938, non-stock and non-profit hospitals and educational institutions are hereby withdrawn upon effectivity of this Code. (Emphasis supplied)The minority states that MIAA is indisputably a juridical person. The minority argues that since the Local Government Code withdrew the tax exemption of all juridical persons, then MIAA is not exempt from real estate tax. Thus, the minority declares:It is evident from the quoted provisions of the Local Government Code that the withdrawn exemptions from realty tax cover not just GOCCs, but all persons. To repeat, the provisions lay down the explicit proposition that the withdrawal of realty tax exemption applies to all persons. The reference to or the inclusion of GOCCs is only clarificatory or illustrative of the explicit provision.The term "All persons" encompasses the two classes of persons recognized under our laws, natural and juridical persons. Obviously, MIAA is not a natural person. Thus, the determinative test is not just whether MIAA is a GOCC, but whether MIAA is a juridical person at all. (Emphasis and underscoring in the original)The minority posits that the "determinative test" whether MIAA is exempt from local taxation is its status — whether MIAA is a juridical person or not. The minority also insists that "Sections 193 and 234 may be examined in isolation from Section 133(o) to ascertain MIAA's claim of exemption."The argument of the minority is fatally flawed. Section 193 of the Local Government Code expressly withdrew the tax exemption of all juridical persons "[u]nless otherwise provided in this Code." Now, Section 133(o) of the Local Government Code expressly provides otherwise, specifically prohibiting local governments from imposing any kind of tax on national government instrumentalities. Section 133(o) states:SEC. 133. Common Limitations on the Taxing Powers of Local Government Units. – Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following:x x x x(o) Taxes, fees or charges of any kinds on the National Government, its agencies and instrumentalities, and local government units. (Emphasis and underscoring supplied)

By express mandate of the Local Government Code, local governments cannot impose any kind of tax on national government instrumentalities like the MIAA. Local governments are devoid of power to tax the national government, its agencies and instrumentalities. The taxing powers of local governments do not extend to the national government, its agencies and instrumentalities, "[u]nless otherwise provided in this Code" as stated in the saving clause of Section 133. The saving clause refers to Section 234(a) on the exception to the exemption from real estate tax of real property owned by the Republic.The minority, however, theorizes that unless exempted in Section 193 itself, all juridical persons are subject to tax by local governments. The minority insists that the juridical persons exempt from local taxation are limited to the three classes of entities specifically enumerated as exempt in Section 193. Thus, the minority states:x x x Under Section 193, the exemption is limited to (a) local water districts; (b) cooperatives duly registered under Republic Act No. 6938; and (c) non-stock and non-profit hospitals and educational institutions. It would be belaboring the obvious why the MIAA does not fall within any of the exempt entities under Section 193. (Emphasis supplied)

The minority's theory directly contradicts and completely negates Section 133(o) of the Local Government Code. This theory will result in gross absurdities. It will make the national government, which itself is a juridical person, subject to tax by local governments since the national government is not included in the enumeration of exempt entities in Section 193. Under this theory, local governments can impose any kind of local tax, and not only real estate tax, on the national government.Under the minority's theory, many national government instrumentalities with juridical personalities will also be subject to any kind of local tax, and not only real estate tax. Some of the national government instrumentalities vested by law with juridical personalities are: Bangko Sentral ng Pilipinas,30 Philippine Rice Research Institute,31Laguna LakeDevelopment Authority,32 Fisheries Development Authority,33 Bases Conversion Development Authority,34Philippine Ports Authority,35 Cagayan de Oro Port Authority,36 San Fernando Port Authority,37 Cebu Port Authority,38 and Philippine National Railways.39

The minority's theory violates Section 133(o) of the Local Government Code which expressly prohibits local governments from imposing any kind of tax on national government instrumentalities. Section 133(o) does not distinguish between national government instrumentalities with or without juridical personalities. Where the law does not distinguish, courts should not distinguish. Thus, Section 133(o) applies to all national government instrumentalities, with or without juridical personalities. The determinative test whether MIAA is exempt from local taxation is not whether MIAA is a juridical person, but whether it is a national government instrumentality under Section 133(o) of the Local Government Code. Section 133(o) is the specific provision of law prohibiting local governments from imposing any kind of tax on the national government, its agencies and instrumentalities.Section 133 of the Local Government Code starts with the saving clause "[u]nless otherwise provided in this Code." This means that unless the Local Government Code grants an express authorization, local governments have no power to tax the national government, its agencies and instrumentalities. Clearly, the rule is local governments have no power to tax the national government, its agencies and instrumentalities. As an exception to this rule, local governments may tax the national government, its agencies and instrumentalities only if the Local Government Code expressly so provides.The saving clause in Section 133 refers to the exception to the exemption in Section 234(a) of the Code, which makes the national government subject to real estate tax when it gives the beneficial use of its real properties to a taxable entity. Section 234(a) of the Local Government Code provides:

SEC. 234. Exemptions from Real Property Tax – The following are exempted from payment of the real property tax:(a) Real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person.x x x. (Emphasis supplied)Under Section 234(a), real property owned by the Republic is exempt from real estate tax. The exception to this exemption is when the government gives the beneficial use of the real property to a taxable entity.The exception to the exemption in Section 234(a) is the only instance when the national government, its agencies and instrumentalities are subject to any kind of tax by local governments. The exception to the exemption applies only to real estate tax and not to any other tax. The justification for the exception to the exemption is that the real property, although owned by the Republic, is not devoted to public use or public service but devoted to the private gain of a taxable person.The minority also argues that since Section 133 precedes Section 193 and 234 of the Local Government Code, the later provisions prevail over Section 133. Thus, the minority asserts:x x x Moreover, sequentially Section 133 antecedes Section 193 and 234. Following an accepted rule of construction, in case of conflict the subsequent provisions should prevail. Therefore, MIAA, as a juridical person, is subject to real property taxes, the general exemptions attaching to instrumentalities under Section 133(o) of the Local Government Code being qualified by Sections 193 and 234 of the same law. (Emphasis supplied)The minority assumes that there is an irreconcilable conflict between Section 133 on one hand, and Sections 193 and 234 on the other. No one has urged that there is such a conflict, much less has any one presenteda persuasive argument that there is such a conflict. The minority's assumption of an irreconcilable conflict in the statutory provisions is an egregious error for two reasons.First, there is no conflict whatsoever between Sections 133 and 193 because Section 193 expressly admits its subordination to other provisions of the Code when Section 193 states "[u]nless otherwise provided in this Code." By its own words, Section 193 admits the superiority of other provisions of the Local Government Code that limit the exercise of the taxing power in Section 193. When a provision of law grants a power but withholds such power on certain matters, there is no conflict between the grant of power and the withholding of power. The grantee of the power simply cannot exercise the power on matters withheld from its power.Second, Section 133 is entitled "Common Limitations on the Taxing Powers of Local Government Units." Section 133 limits the grant to local governments of the power to tax, and not merely the exercise of a delegated power to tax. Section 133 states that the taxing powers of local governments "shall not extend to the levy" of any kind of tax on the national government, its agencies and instrumentalities. There is no clearer limitation on the taxing power than this.Since Section 133 prescribes the "common limitations" on the taxing powers of local governments, Section 133 logically prevails over Section 193 which grants local governments such taxing powers. By their very meaning and purpose, the "common limitations" on the taxing power prevail over the grant or exercise of the taxing power. If the taxing power of local governments in Section 193 prevails over the limitations on such taxing power in Section 133, then local governments can impose any kind of tax on the national government, its agencies and instrumentalities — a gross absurdity.Local governments have no power to tax the national government, its agencies and instrumentalities, except as otherwise provided in the Local Government Code pursuant to the saving clause in Section 133 stating "[u]nless otherwise provided in this Code." This exception — which is an exception to the exemption of the Republic from real estate tax imposed by local governments — refers to Section 234(a) of the Code. The exception to the exemption in Section 234(a) subjects real property owned by the Republic, whether titled in the name of the national government, its agencies or instrumentalities, to real estate tax if the beneficial use of such property is given to a taxable entity.The minority also claims that the definition in the Administrative Code of the phrase "government-owned or controlled corporation" is not controlling. The minority points out that Section 2 of the Introductory Provisions of the Administrative Code admits that its definitions are not controlling when it provides:SEC. 2. General Terms Defined. — Unless the specific words of the text, or the context as a whole, or a particular statute, shall require a different meaning:x x x xThe minority then concludes that reliance on the Administrative Code definition is "flawed."The minority's argument is a non sequitur. True, Section 2 of the Administrative Code recognizes that a statute may require a different meaning than that defined in the Administrative Code. However, this does not automatically mean that the definition in the Administrative Code does not apply to the Local Government Code. Section 2 of the Administrative Code clearly states that "unless the specific words x x x of a particular statute shall require a different meaning," the definition in Section 2 of the Administrative Code shall apply. Thus, unless there is specific language in the Local Government Code defining the phrase "government-owned or controlled corporation" differently from the definition in the Administrative Code, the definition in the Administrative Code prevails.The minority does not point to any provision in the Local Government Code defining the phrase "government-owned or controlled corporation" differently from the definition in the Administrative Code. Indeed, there is none. The Local Government Code is silent on the definition of the phrase "government-owned or controlled corporation." The Administrative Code, however, expressly defines the phrase "government-owned or controlled corporation." The inescapable conclusion is that the Administrative Code definition of the phrase "government-owned or controlled corporation" applies to the Local Government Code.The third whereas clause of the Administrative Code states that the Code "incorporates in a unified document the major structural, functional and procedural principles and rules of governance." Thus, the Administrative Code is the governing law defining the status

and relationship of government departments, bureaus, offices, agencies and instrumentalities. Unless a statute expressly provides for a different status and relationship for a specific government unit or entity, the provisions of the Administrative Code prevail.The minority also contends that the phrase "government-owned or controlled corporation" should apply only to corporations organized under the Corporation Code, the general incorporation law, and not to corporations created by special charters. The minority sees no reason why government corporations with special charters should have a capital stock. Thus, the minority declares:I submit that the definition of "government-owned or controlled corporations" under the Administrative Code refer to those corporations owned by the government or its instrumentalities which are created not by legislative enactment, but formed and organized under the Corporation Code through registration with the Securities and Exchange Commission. In short, these are GOCCs without original charters.x x x xIt might as well be worth pointing out that there is no point in requiring a capital structure for GOCCs whose full ownership is limited by its charter to the State or Republic. Such GOCCs are not empowered to declare dividends or alienate their capital shares.The contention of the minority is seriously flawed. It is not in accord with the Constitution and existing legislations. It will also result in gross absurdities.First, the Administrative Code definition of the phrase "government-owned or controlled corporation" does not distinguish between one incorporated under the Corporation Code or under a special charter. Where the law does not distinguish, courts should not distinguish.Second, Congress has created through special charters several government-owned corporations organized as stock corporations. Prime examples are the Land Bank of the Philippines and the Development Bank of the Philippines. The special charter40 of the Land Bank of the Philippines provides:SECTION 81. Capital. — The authorized capital stock of the Bank shall be nine billion pesos, divided into seven hundred and eighty million common shares with a par value of ten pesos each, which shall be fully subscribed by the Government, and one hundred and twenty million preferred shares with a par value of ten pesos each, which shall be issued in accordance with the provisions of Sections seventy-seven and eighty-three of this Code. (Emphasis supplied)Likewise, the special charter41 of the Development Bank of the Philippines provides:SECTION 7. Authorized Capital Stock – Par value. — The capital stock of the Bank shall be Five Billion Pesos to be divided into Fifty Million common shares with par value of P100 per share. These shares are available for subscription by the National Government. Upon the effectivity of this Charter, the National Government shall subscribe to Twenty-Five Million common shares of stock worth Two Billion Five Hundred Million which shall be deemed paid for by the Government with the net asset values of the Bank remaining after the transfer of assets and liabilities as provided in Section 30 hereof. (Emphasis supplied)Other government-owned corporations organized as stock corporations under their special charters are the Philippine Crop Insurance Corporation,42 Philippine International Trading Corporation,43 and the Philippine National Bank44 before it was reorganized as a stock corporation under the Corporation Code. All these government-owned corporations organized under special charters as stock corporations are subject to real estate tax on real properties owned by them. To rule that they are not government-owned or controlled corporations because they are not registered with the Securities and Exchange Commission would remove them from the reach of Section 234 of the Local Government Code, thus exempting them from real estate tax.Third, the government-owned or controlled corporations created through special charters are those that meet the two conditions prescribed in Section 16, Article XII of the Constitution. The first condition is that the government-owned or controlled corporation must be established for the common good. The second condition is that the government-owned or controlled corporation must meet the test of economic viability. Section 16, Article XII of the 1987 Constitution provides:SEC. 16. The Congress shall not, except by general law, provide for the formation, organization, or regulation of private corporations. Government-owned or controlled corporations may be created or established by special charters in the interest of the common good and subject to the test of economic viability. (Emphasis and underscoring supplied)The Constitution expressly authorizes the legislature to create "government-owned or controlled corporations" through special charters only if these entities are required to meet the twin conditions of common good and economic viability. In other words, Congress has no power to create government-owned or controlled corporations with special charters unless they are made to comply with the two conditions of common good and economic viability. The test of economic viability applies only to government-owned or controlled corporations that perform economic or commercial activities and need to compete in the market place. Being essentially economic vehicles of the State for the common good — meaning for economic development purposes — these government-owned or controlled corporations with special charters are usually organized as stock corporations just like ordinary private corporations.In contrast, government instrumentalities vested with corporate powers and performing governmental or public functions need not meet the test of economic viability. These instrumentalities perform essential public services for the common good, services that every modern State must provide its citizens. These instrumentalities need not be economically viable since the government may even subsidize their entire operations. These instrumentalities are not the "government-owned or controlled corporations" referred to in Section 16, Article XII of the 1987 Constitution.Thus, the Constitution imposes no limitation when the legislature creates government instrumentalities vested with corporate powers but performing essential governmental or public functions. Congress has plenary authority to create government instrumentalities vested with corporate powers provided these instrumentalities perform essential government functions or public services. However, when the legislature creates through special charters corporations that perform economic or commercial

activities, such entities — known as "government-owned or controlled corporations" — must meet the test of economic viability because they compete in the market place.This is the situation of the Land Bank of the Philippines and the Development Bank of the Philippines and similar government-owned or controlled corporations, which derive their income to meet operating expenses solely from commercial transactions in competition with the private sector. The intent of the Constitution is to prevent the creation of government-owned or controlled corporations that cannot survive on their own in the market place and thus merely drain the public coffers.Commissioner Blas F. Ople, proponent of the test of economic viability, explained to the Constitutional Commission the purpose of this test, as follows:MR. OPLE: Madam President, the reason for this concern is really that when the government creates a corporation, there is a sense in which this corporation becomes exempt from the test of economic performance. We know what happened in the past. If a government corporation loses, then it makes its claim upon the taxpayers' money through new equity infusions from the government and what is always invoked is the common good. That is the reason why this year, out of a budget of P115 billion for the entire government, about P28 billion of this will go into equity infusions to support a few government financial institutions. And this is all taxpayers' money which could have been relocated to agrarian reform, to social services like health and education, to augment the salaries of grossly underpaid public employees. And yet this is all going down the drain.Therefore, when we insert the phrase "ECONOMIC VIABILITY" together with the "common good," this becomes a restraint on future enthusiasts for state capitalism to excuse themselves from the responsibility of meeting the market test so that they become viable. And so, Madam President, I reiterate, for the committee's consideration and I am glad that I am joined in this proposal by Commissioner Foz, the insertion of the standard of "ECONOMIC VIABILITY OR THE ECONOMIC TEST," together with the common good.45

Father Joaquin G. Bernas, a leading member of the Constitutional Commission, explains in his textbook The 1987 Constitution of the Republic of the Philippines: A Commentary:The second sentence was added by the 1986 Constitutional Commission. The significant addition, however, is the phrase "in the interest of the common good and subject to the test of economic viability." The addition includes the ideas that they must show capacity to function efficiently in business and that they should not go into activities which the private sector can do better. Moreover, economic viability is more than financial viability but also includes capability to make profit and generate benefits not quantifiable in financial terms.46 (Emphasis supplied)Clearly, the test of economic viability does not apply to government entities vested with corporate powers and performing essential public services. The State is obligated to render essential public services regardless of the economic viability of providing such service. The non-economic viability of rendering such essential public service does not excuse the State from withholding such essential services from the public.However, government-owned or controlled corporations with special charters, organized essentially for economic or commercial objectives, must meet the test of economic viability. These are the government-owned or controlled corporations that are usually organized under their special charters as stock corporations, like the Land Bank of the Philippines and the Development Bank of the Philippines. These are the government-owned or controlled corporations, along with government-owned or controlled corporations organized under the Corporation Code, that fall under the definition of "government-owned or controlled corporations" in Section 2(10) of the Administrative Code.The MIAA need not meet the test of economic viability because the legislature did not create MIAA to compete in the market place. MIAA does not compete in the market place because there is no competing international airport operated by the private sector. MIAA performs an essential public service as the primary domestic and international airport of the Philippines. The operation of an international airport requires the presence of personnel from the following government agencies:1. The Bureau of Immigration and Deportation, to document the arrival and departure of passengers, screening out those without visas or travel documents, or those with hold departure orders;2. The Bureau of Customs, to collect import duties or enforce the ban on prohibited importations;3. The quarantine office of the Department of Health, to enforce health measures against the spread of infectious diseases into the country;4. The Department of Agriculture, to enforce measures against the spread of plant and animal diseases into the country;5. The Aviation Security Command of the Philippine National Police, to prevent the entry of terrorists and the escape of criminals, as well as to secure the airport premises from terrorist attack or seizure;6. The Air Traffic Office of the Department of Transportation and Communications, to authorize aircraft to enter or leave Philippine airspace, as well as to land on, or take off from, the airport; and7. The MIAA, to provide the proper premises — such as runway and buildings — for the government personnel, passengers, and airlines, and to manage the airport operations.All these agencies of government perform government functions essential to the operation of an international airport.MIAA performs an essential public service that every modern State must provide its citizens. MIAA derives its revenues principally from the mandatory fees and charges MIAA imposes on passengers and airlines. The terminal fees that MIAA charges every passenger are regulatory or administrative fees47 and not income from commercial transactions.MIAA falls under the definition of a government instrumentality under Section 2(10) of the Introductory Provisions of the Administrative Code, which provides:SEC. 2. General Terms Defined. – x x x x

(10) Instrumentality refers to any agency of the National Government, not integrated within the department framework, vested with special functions or jurisdiction by law, endowed with some if not all corporate powers, administering special funds, and enjoying operational autonomy, usually through a charter. x x x (Emphasis supplied)The fact alone that MIAA is endowed with corporate powers does not make MIAA a government-owned or controlled corporation. Without a change in its capital structure, MIAA remains a government instrumentality under Section 2(10) of the Introductory Provisions of the Administrative Code. More importantly, as long as MIAA renders essential public services, it need not comply with the test of economic viability. Thus, MIAA is outside the scope of the phrase "government-owned or controlled corporations" under Section 16, Article XII of the 1987 Constitution.The minority belittles the use in the Local Government Code of the phrase "government-owned or controlled corporation" as merely "clarificatory or illustrative." This is fatal. The 1987 Constitution prescribes explicit conditions for the creation of "government-owned or controlled corporations." The Administrative Code defines what constitutes a "government-owned or controlled corporation." To belittle this phrase as "clarificatory or illustrative" is grave error.To summarize, MIAA is not a government-owned or controlled corporation under Section 2(13) of the Introductory Provisions of the Administrative Code because it is not organized as a stock or non-stock corporation. Neither is MIAA a government-owned or controlled corporation under Section 16, Article XII of the 1987 Constitution because MIAA is not required to meet the test of economic viability. MIAA is a government instrumentality vested with corporate powers and performing essential public services pursuant to Section 2(10) of the Introductory Provisions of the Administrative Code. As a government instrumentality, MIAA is not subject to any kind of tax by local governments under Section 133(o) of the Local Government Code. The exception to the exemption in Section 234(a) does not apply to MIAA because MIAA is not a taxable entity under the Local Government Code. Such exception applies only if the beneficial use of real property owned by the Republic is given to a taxable entity.Finally, the Airport Lands and Buildings of MIAA are properties devoted to public use and thus are properties of public dominion. Properties of public dominion are owned by the State or the Republic. Article 420 of the Civil Code provides:Art. 420. The following things are property of public dominion:(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridges constructed by the State, banks, shores, roadsteads, and others of similar character;(2) Those which belong to the State, without being for public use, and are intended for some public service or for the development of the national wealth. (Emphasis supplied)The term "ports x x x constructed by the State" includes airports and seaports. The Airport Lands and Buildings of MIAA are intended for public use, and at the very least intended for public service. Whether intended for public use or public service, the Airport Lands and Buildings are properties of public dominion. As properties of public dominion, the Airport Lands and Buildings are owned by the Republic and thus exempt from real estate tax under Section 234(a) of the Local Government Code.4. ConclusionUnder Section 2(10) and (13) of the Introductory Provisions of the Administrative Code, which governs the legal relation and status of government units, agencies and offices within the entire government machinery, MIAA is a government instrumentality and not a government-owned or controlled corporation. Under Section 133(o) of the Local Government Code, MIAA as a government instrumentality is not a taxable person because it is not subject to "[t]axes, fees or charges of any kind" by local governments. The only exception is when MIAA leases its real property to a "taxable person" as provided in Section 234(a) of the Local Government Code, in which case the specific real property leased becomes subject to real estate tax. Thus, only portions of the Airport Lands and Buildings leased to taxable persons like private parties are subject to real estate tax by the City of Parañaque.Under Article 420 of the Civil Code, the Airport Lands and Buildings of MIAA, being devoted to public use, are properties of public dominion and thus owned by the State or the Republic of the Philippines. Article 420 specifically mentions "ports x x x constructed by the State," which includes public airports and seaports, as properties of public dominion and owned by the Republic. As properties of public dominion owned by the Republic, there is no doubt whatsoever that the Airport Lands and Buildings are expressly exempt from real estate tax under Section 234(a) of the Local Government Code. This Court has also repeatedly ruled that properties of public dominion are not subject to execution or foreclosure sale.

WHEREFORE, we GRANT the petition. We SET ASIDE the assailed Resolutions of the Court of Appeals of 5 October 2001 and 27 September 2002 in CA-G.R. SP No. 66878. We DECLARE the Airport Lands and Buildings of the Manila International Airport Authority EXEMPT from the real estate tax imposed by the City of Parañaque. We declare VOID all the real estate tax assessments, including the final notices of real estate tax delinquencies, issued by the City of Parañaque on the Airport Lands and Buildings of the Manila International Airport Authority, except for the portions that the Manila International Airport Authority has leased to private parties. We also declare VOID the assailed auction sale, and all its effects, of the Airport Lands and Buildings of the Manila International Airport Authority.

Manila International Airport Authority vs. City of PasayFacts: Petitioner Manila International Airport Authority (MIAA) operates and administers the Ninoy Aquino International Airport(NAIA) Complex under Executive Order No.903 (EO 903), otherwise known as the Revised Charter of the Manila International Airport Authority. Under Sections 3 and22 of EO 903, approximately 600 hectares of land, including the runways, the airport tower, and other airport buildings, were transferred to MIAA. The NAIA Complex is located along the border between Pasay City and Parañaque City. MIAA received Final Notices of Real Property Tax Delinquency from the City of Pasay for the taxable years 1992 to 2001. The City of Pasay, through its City Treasurer, issued notices of levy and warrants of levy for the NAIA Pasay properties.

Thereafter, the City Mayor of Pasay threatened to sell at public auction the NAIA Pasay properties if the delinquent real property taxes remain unpaid. MIAA filed with the Court of Appeals a petition for prohibition and injunction withprayer for preliminary injunction or temporary restraining order. The petition sought to enjoin the City of Pasay fromimposing real property taxes on, levying against, and auctioning for public sale the NAIA Pasay properties.Court of Appeals: Upheld the power of the City of Pasay to impose and collect realty taxes on the NAIA Pasay properties. Sections 193 and 234 of Republic Act No.7160 or the Local Government Code withdrew the exemption from payment of real property taxes granted to natural or juridical persons, including government-owned or controlled corporations. Since MIAA is a government-owned corporation, it follows that its tax exemption under Section 21 of EO 903 has been withdrawn upon the effectivity of the Local Government Code.Issue: WON the NAIA Pasay properties of MIAA are exempt from real property tax – YES.Held:1. MIAA is a government "instrumentality" that does not qualify as a "government-owned or controlled corporation. Under Section 133(o) of the Local Government Code, local government units have no power to tax instrumentalities of the national government. Therefore, MIAA is exempt from any kind of tax from the local governments. A government "instrumentality" may or may not be a "government-owned or controlled corporation" (Section 2(10) of the Introductory Provisions of the Administrative Code of 1987). A government-owned or controlled corporation must be "organized as a stock or non-stock corporation." MIAA is not organized as a stock or non-stock corporation. It is not a stock corporation because it has no capital stock divided into shares. It is also not a non-stock corporation because it has no members. The Government cannot be considered as the sole member of MIAA because non-stock corporations cannot distribute any part of their income to their members. Section 11 of the MIAA Charter mandates MIAA to remit 20% of its annual gross operating income to the National Treasury. MIAA is like any other government instrumentality, but is vested with corporate powers to perform efficiently its governmental functions. When the law vests in a government instrumentality corporate powers, the instrumentality does not become a corporation.2. The airport lands and buildings of MIAA are properties of public dominion intended for public use, and as such are exempt from real property tax under Section 234(a) of the Local Government Code.(Note: In Manila International Airport Authority v. Court of Appeals(2006 MIAA case), the Court already resolved the issue of whether the airport lands and buildings f MIAA are exempt from tax under existing laws. The court merely reiterated its ruling in that case.)

MANILA INTERNATIONAL AIRPORT AUTHORITY vs.CITY OF PASAY, SANGGUNIANG PANGLUNGSOD NG PASAY, CITY MAYOR OF PASAY, CITY TREASURER OF PASAY, and CITY ASSESSOR OF PASAY,

The FactsPetitioner Manila International Airport Authority (MIAA) operates and administers the Ninoy Aquino International Airport (NAIA) Complex under Executive Order No. 903 (EO 903),3 otherwise known as the Revised Charter of the Manila International Airport Authority. EO 903 was issued on 21 July 1983 by then President Ferdinand E. Marcos. Under Sections 34 and 225 of EO 903, approximately 600 hectares of land, including the runways, the airport tower, and other airport buildings, were transferred to MIAA. The NAIA Complex is located along the border between Pasay City and Parañaque City.On 28 August 2001, MIAA received Final Notices of Real Property Tax Delinquency from the City of Pasay for the taxable years 1992 to 2001. MIAA’s real property tax delinquency for its real properties located in NAIA Complex, Ninoy Aquino Avenue, Pasay City (NAIA Pasay properties) is tabulated as follows:

TAX DECLA-RATION TAXABLE YEAR TAX DUE PENALTY TOTAL

A7-183-08346 1997-2001 243,522,855.00 123,351,728.18 366,874,583.18

A7-183-05224 1992-2001 113,582,466.00 71,159,414.98 184,741,880.98

A7-191-00843 1992-2001 54,454,800.00 34,115,932.20 88,570,732.20

A7-191-00140 1992-2001 1,632,960.00 1,023,049.44 2,656,009.44

A7-191-00139 1992-2001 6,068,448.00 3,801,882.85 9,870,330.85

A7-183-05409 1992-2001 59,129,520.00 37,044,644.28 96,174,164.28

A7-183-05410 1992-2001 20,619,720.00 12,918,254.58 33,537,974.58

A7-183-05413 1992-2001 7,908,240.00 4,954,512.36 12,862,752.36

A7-183-05412 1992-2001 18,441,981.20 11,553,901.13 29,995,882.33

A7-183-05411 1992-2001 109,946,736.00 68,881,630.13 178,828,366.13

A7-183-05245 1992-2001 7,440,000.00 4,661,160.00 12,101,160.00

GRAND TOTAL P642,747,726.20 P373,466,110.13 P1,016,213,836.33

On 24 August 2001, the City of Pasay, through its City Treasurer, issued notices of levy and warrants of levy for the NAIA Pasay properties. MIAA received the notices and warrants of levy on 28 August 2001. Thereafter, the City Mayor of Pasay threatened to sell at public auction the NAIA Pasay properties if the delinquent real property taxes remain unpaid.On 29 October 2001, MIAA filed with the Court of Appeals a petition for prohibition and injunction with prayer for preliminary injunction or temporary restraining order. The petition sought to enjoin the City of Pasay from imposing real property taxes on, levying against, and auctioning for public sale the NAIA Pasay properties.On 30 October 2002, the Court of Appeals dismissed the petition and upheld the power of the City of Pasay to impose and collect realty taxes on the NAIA Pasay properties. MIAA filed a motion for reconsideration, which the Court of Appeals denied. Hence, this petition.The Court of Appeals’ Ruling

The Court of Appeals held that Sections 193 and 234 of Republic Act No. 7160 or the Local Government Code, which took effect on 1 January 1992, withdrew the exemption from payment of real property taxes granted to natural or juridical persons, including government-owned or controlled corporations, except local water districts, cooperatives duly registered under Republic Act No. 6938, non-stock and non-profit hospitals and educational institutions. Since MIAA is a government-owned corporation, it follows that its tax exemption under Section 21 of EO 903 has been withdrawn upon the effectivity of the Local Government Code.The IssueThe issue raised in this petition is whether the NAIA Pasay properties of MIAA are exempt from real property tax.The Court’s RulingThe petition is meritorious.In ruling that MIAA is not exempt from paying real property tax, the Court of Appeals cited Sections 193 and 234 of the Local Government Code which read:SECTION 193. Withdrawal of Tax Exemption Privileges. – Unless otherwise provided in this Code, tax exemptions or incentives granted to, or presently enjoyed by all persons, whether natural or juridical, including government-owned or controlled corporations, except local water districts, cooperatives duly registered under R.A. No. 6938, non-stock and non-profit hospitals and educational institutions, are hereby withdrawn upon the effectivity of this Code.SECTION 234. Exemptions from Real Property Tax. – The following are exempted from payment of the real property tax:(a) Real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof has been granted, for consideration or otherwise to a taxable person;(b) Charitable institutions, churches, parsonages or convents appurtenant thereto, mosques, non-profit or religious cemeteries and all lands, buildings and improvements actually, directly, and exclusively used for religious, charitable or educational purposes;(c) All machineries and equipment that are actually, directly and exclusively used by local water districts and government owned or controlled corporations engaged in the supply and distribution of water and/or generation and transmission of electric power;(d) All real property owned by duly registered cooperatives as provided for under R.A. No. 6938; and(e) Machinery and equipment used for pollution control and environment protection.

Except as provided herein, any exemption from payment of real property tax previously granted to, or presently enjoyed by, all persons, whether natural or juridical, including all government-owned or controlled corporations are hereby withdrawn upon the effectivity of this Code.

The Court of Appeals held that as a government-owned corporation, MIAA’s tax exemption under Section 21 of EO 903 has already been withdrawn upon the effectivity of the Local Government Code in 1992.In Manila International Airport Authority v. Court of Appeals6 (2006 MIAA case), this Court already resolved the issue of whether the airport lands and buildings of MIAA are exempt from tax under existing laws. The 2006 MIAA case originated from a petition for prohibition and injunction which MIAA filed with the Court of Appeals, seeking to restrain the City of Parañaque from imposing real property tax on, levying against, and auctioning for public sale the airport lands and buildings located in Parañaque City. The only difference between the 2006 MIAA case and this case is that the 2006 MIAA case involved airport lands and buildings located in Parañaque City while this case involved airport lands and buildings located in Pasay City. The 2006 MIAA case and this case raised the same threshold issue: whether the local government can impose real property tax on the airport lands, consisting mostly of the runways, as well as the airport buildings, of MIAA. In the 2006 MIAA case, this Court held:

To summarize, MIAA is not a government-owned or controlled corporation under Section 2(13) of the Introductory Provisions of the Administrative Code because it is not organized as a stock or non-stock corporation. Neither is MIAA a government-owned or controlled corporation under Section 16, Article XII of the 1987 Constitution because MIAA is not required to meet the test of economic viability. MIAA is a government instrumentality vested with corporate powers and performing essential public services pursuant to Section 2(10) of the Introductory Provisions of the Administrative Code. As a government instrumentality, MIAA is not subject to any kind of tax by local governments under Section 133(o) of the Local Government Code. The exception to the exemption in Section 234(a) does not apply to MIAA because MIAA is not a taxable entity under the Local Government Code. Such exception applies only if the beneficial use of real property owned by the Republic is given to a taxable entity.Finally, the Airport Lands and Buildings of MIAA are properties devoted to public use and thus are properties of public dominion. Properties of public dominion are owned by the State or the Republic. Article 420 of the Civil Code provides:Art. 420. The following things are property of public dominion:

(1) Those intended for public use, such as roads, canals, rivers, torrents, ports and bridgesconstructed by the State, banks, shores, roadsteads, and others of similar character;(2) Those which belong to the State, without being for public use, and are intended for some public service or for the development of the national wealth.

The term "ports x x x constructed by the State" includes airports and seaports. The Airport Lands and Buildings of MIAA are intended for public use, and at the very least intended for public service. Whether intended for public use or public service, the Airport Lands and Buildings are properties of public dominion. As properties of public dominion, the Airport Lands and Buildings are owned by the Republic and thus exempt from real estate tax under Section 234(a) of the Local Government Code.7 (Emphasis in the original)

The definition of "instrumentality" under Section 2(10) of the Introductory Provisions of the Administrative Code of 1987 uses the phrase "includes x x x government-owned or controlled corporations" which means that a government "instrumentality" may or may not be a "government-owned or controlled corporation." Obviously, the term government "instrumentality" is broader than the term "government-owned or controlled corporation." Section 2(10) provides:SEC. 2. General Terms Defined.– x x x(10) Instrumentality refers to any agency of the national Government, not integrated within the department framework, vested with special functions or jurisdiction by law, endowed with some if not all corporate powers, administering special funds, and enjoying operational autonomy, usually through a charter. This term includes regulatory agencies, chartered institutions and government-owned or controlled corporations.The term "government-owned or controlled corporation" has a separate definition under Section 2(13)8 of the Introductory Provisions of the Administrative Code of 1987:SEC. 2. General Terms Defined.– x x x(13) Government-owned or controlled corporation refers to any agency organized as a stock or non-stock corporation, vested with functions relating to public needs whether governmental or proprietary in nature, and owned by the Government directly or through its instrumentalities either wholly, or, where applicable as in the case of stock corporations, to the extent of at least fifty-one (51) percent of its capital stock: Provided, That government-owned or controlled corporations may further be categorized by the department of Budget, the Civil Service Commission, and the Commission on Audit for the purpose of the exercise and discharge of their respective powers, functions and responsibilities with respect to such corporations.The fact that two terms have separate definitions means that while a government "instrumentality" may include a "government-owned or controlled corporation," there may be a government "instrumentality" that will not qualify as a "government-owned or controlled corporation."

A close scrutiny of the definition of "government-owned or controlled corporation" in Section 2(13) will show that MIAA would not fall under such definition. MIAA is a government "instrumentality" that does not qualify as a "government-owned or controlled corporation." As explained in the 2006 MIAA case:A government-owned or controlled corporation must be "organized as a stock or non-stock corporation." MIAA is not organized as a stock or non-stock corporation. MIAA is not a stock corporation because it has no capital stock divided into shares. MIAA has no stockholders or voting shares. x x x

Section 3 of the Corporation Code defines a stock corporation as one whose "capital stock is divided into shares and x x x authorized to distribute to the holders of such shares dividends x x x." MIAA has capital but it is not divided into shares of stock. MIAA has no stockholders or voting shares. Hence, MIAA is not a stock corporation.x x x

MIAA is also not a non-stock corporation because it has no members. Section 87 of the Corporation Code defines a non-stock corporation as "one where no part of its income is distributable as dividends to its members, trustees or officers." A non-stock corporation must have members. Even if we assume that the Government is considered as the sole member of MIAA, this will not make MIAA a non-stock corporation. Non-stock corporations cannot distribute any part of their income to their members. Section 11 of the MIAA Charter mandates MIAA to remit 20% of its annual gross operating income to the National Treasury. This prevents MIAA from qualifying as a non-stock corporation.Section 88 of the Corporation Code provides that non-stock corporations are "organized for charitable, religious, educational, professional, cultural, recreational, fraternal, literary, scientific, social, civil service, or similar purposes, like trade, industry, agriculture and like chambers." MIAA is not organized for any of these purposes. MIAA, a public utility, is organized to operate an international and domestic airport for public use.

Since MIAA is neither a stock nor a non-stock corporation, MIAA does not qualify as a government-owned or controlled corporation. What then is the legal status of MIAA within the National Government?MIAA is a government instrumentality vested with corporate powers to perform efficiently its governmental functions. MIAA is like any other government instrumentality, the only difference is that MIAA is vested with corporate powers. x x x

When the law vests in a government instrumentality corporate powers, the instrumentality does not become a corporation. Unless the government instrumentality is organized as a stock or non-stock corporation, it remains a government instrumentality exercising not only governmental but also corporate powers. Thus, MIAA exercises the governmental powers of eminent domain, police authority and the levying of fees and charges. At the same time, MIAA exercises "all the powers of a corporation under the Corporation Law, insofar as these powers are not inconsistent with the provisions of this Executive Order."9

Thus, MIAA is not a government-owned or controlled corporation but a government instrumentality which is exempt from any kind of tax from the local governments. Indeed, the exercise of the taxing power of local government units is subject to the limitations enumerated in Section 133 of the Local Government Code.10 Under Section 133(o)11 of the Local Government Code, local government units have no power to tax instrumentalities of the national government like the MIAA. Hence, MIAA is not liable to pay real property tax for the NAIA Pasay properties.

Furthermore, the airport lands and buildings of MIAA are properties of public dominion intended for public use, and as such are exempt from real property tax under Section 234(a) of the Local Government Code. However, under the same provision, if MIAA leases its real property to a taxable person, the specific property leased becomes subject to real property tax.12 In this case, only those portions of the NAIA Pasay properties which are leased to taxable persons like private parties are subject to real property tax by the City of Pasay.WHEREFORE, we GRANT the petition. We SET ASIDE the Decision dated 30 October 2002 and the Resolution dated 19 March 2004 of the Court of Appeals in CA-G.R. SP No. 67416. We DECLARE the NAIA Pasay properties of the Manila International Airport Authority EXEMPT from real property tax imposed by the City of Pasay. We declare VOID all the real property tax assessments, including the final notices of real property tax delinquencies, issued by the City of Pasay on the NAIA Pasay properties of the Manila International Airport Authority, except for the portions that the Manila International Airport Authority has leased to private parties.No costs.

Bagatsing v. RamirezG.R. No. L-41631 (December 17, 1976)FACTS: The Municipal Board of Manila enacted Ordinance No. 7522, “An Ordinance Regulating the Operation of Public Markets and Prescribing Fees for the Rentals of Stalls and Providing Penalties for Violation thereof and for other Purposes.” Respondent were seeking the declaration of nullity of the Ordinance for the reason that a) the publication requirement under the Revised Charter of the City of Manila has not been complied with, b) the Market Committee was not given any participation in the enactment, c) Sec. 3(e) of the Anti-Graft and Corrupt Practices Act has been violated, and d) the ordinance would violate P.D. 7 prescribing the collection of fees and charges on livestock and animal products. ISSUE: What law shall govern the publication of tax ordinance enacted by the Municipal Board of Manila, the Revised City Charter or the Local Tax Code.HELD:The fact that one is a special law and the other a general law creates the presumption that the special law is to be considered an exception to the general. The Revised Charter of Manila speaks of “ordinance” in general whereas the Local Tax Code relates to “ordinances levying or imposing taxes, fees or other charges” in particular. In regard therefore, the Local Tax Code controls.

HON. RAMON D. BAGATSING, as Mayor of the City of Manila; ROMAN G. GARGANTIEL, as Secretary to the Mayor; THE MARKET ADMINISTRATOR; and THE MUNICIPAL BOARD OF MANILA, vs.HON. PEDRO A. RAMIREZ, in his capacity as Presiding Judge of the Court of First Instance of Manila, Branch XXX and the FEDERATION OF MANILA MARKET VENDORS, INC., respondents.

The chief question to be decided in this case is what law shall govern the publication of a tax ordinance enacted by the Municipal Board of Manila, the Revised City Charter (R.A. 409, as amended), which requires publication of the ordinance before its enactment and after its approval, or the Local Tax Code (P.D. No. 231), which only demands publication after approval.On June 12, 1974, the Municipal Board of Manila enacted Ordinance No. 7522, "AN ORDINANCE REGULATING THE OPERATION OF PUBLIC MARKETS AND PRESCRIBING FEES FOR THE RENTALS OF STALLS AND PROVIDING PENALTIES FOR VIOLATION THEREOF AND FOR OTHER PURPOSES." The petitioner City Mayor, Ramon D. Bagatsing, approved the ordinance on June 15, 1974.On February 17, 1975, respondent Federation of Manila Market Vendors, Inc. commenced Civil Case 96787 before the Court of First Instance of Manila presided over by respondent Judge, seeking the declaration of nullity of Ordinance No. 7522 for the reason that (a) the publication requirement under the Revised Charter of the City of Manila has not been complied with; (b) the Market Committee was not given any participation in the enactment of the ordinance, as envisioned by Republic Act 6039; (c) Section 3 (e) of the Anti-Graft and Corrupt Practices Act has been violated; and (d) the ordinance would violate Presidential Decree No. 7 of September 30, 1972 prescribing the collection of fees and charges on livestock and animal products.

Resolving the accompanying prayer for the issuance of a writ of preliminary injunction, respondent Judge issued an order on March 11, 1975, denying the plea for failure of the respondent Federation of Manila Market Vendors, Inc. to exhaust the administrative remedies outlined in the Local Tax Code.After due hearing on the merits, respondent Judge rendered its decision on August 29, 1975, declaring the nullity of Ordinance No. 7522 of the City of Manila on the primary ground of non-compliance with the requirement of publication under the Revised City Charter. Respondent Judge ruled:

There is, therefore, no question that the ordinance in question was not published at all in two daily newspapers of general circulation in the City of Manila before its enactment. Neither was it published in the same manner after approval, although it was posted in the legislative hall and in all city public markets and city public libraries. There being no compliance with the mandatory requirement of publication before and after approval, the ordinance in question is invalid and, therefore, null and void.

Petitioners moved for reconsideration of the adverse decision, stressing that (a) only a post-publication is required by the Local Tax Code; and (b) private respondent failed to exhaust all administrative remedies before instituting an action in court.On September 26, 1975, respondent Judge denied the motion.Forthwith, petitioners brought the matter to Us through the present petition for review on certiorari.We find the petition impressed with merits.

1. The nexus of the present controversy is the apparent conflict between the Revised Charter of the City of Manila and the Local Tax Code on the manner of publishing a tax ordinance enacted by the Municipal Board of Manila. For, while Section 17 of the Revised Charter provides:Each proposed ordinance shall be published in two daily newspapers of general circulation in the city, and shall not be discussed or enacted by the Board until after the third day following such publication. * * * Each approved ordinance * * * shall be published in two daily newspapers of general circulation in the city, within ten days after its approval; and shall take effect and be in force on and after the twentieth day following its publication, if no date is fixed in the ordinance.Section 43 of the Local Tax Code directs:

Within ten days after their approval, certified true copies of all provincial, city, municipal and barrioordinances levying or imposing taxes, fees or other charges shall be published for three consecutive days in a newspaper or publication widely circulated within the jurisdiction of the local government, or posted in the local legislative hall or premises and in two other conspicuous places within the territorial jurisdiction of the local government. In either case, copies of all provincial, city, municipal and barrio ordinances shall be furnished the treasurers of the respective component and mother units of a local government for dissemination.In other words, while the Revised Charter of the City of Manila requires publication before the enactment of the ordinance and after the approval thereof in two daily newspapers of general circulation in the city, the Local Tax Code only prescribes for publication after the approval of "ordinances levying or imposing taxes, fees or other charges" either in a newspaper or publication widely circulated within the jurisdiction of the local government or by posting the ordinance in the local legislative hall or premises and in two other conspicuous places within the territorial jurisdiction of the local government. Petitioners' compliance with the Local Tax Code rather than with the Revised Charter of the City spawned this litigation.

There is no question that the Revised Charter of the City of Manila is a special act since it relates only to the City of Manila, whereas the Local Tax Code is a general law because it applies universally to all local governments. Blackstone defines general law as a universal rule affecting the entire community and special law as one relating to particular persons or things of a class. 1 And the rule commonly said is that a prior special law is not ordinarily repealed by a subsequent general law. The fact that one is special and the other general creates a presumption that the special is to be considered as remaining an exception of the general, one as a general law of the land, the other as the law of a particular case. 2 However, the rule readily yields to a situation where the special statute refers to a subject in general, which the general statute treats in particular. The exactly is the circumstance obtaining in the case at bar. Section 17 of the Revised Charter of the City of Manila speaks of "ordinance" in general, i.e., irrespective of the nature and scope thereof,whereas, Section 43 of the Local Tax Code relates to "ordinances levying or imposing taxes, fees or other charges" in particular. In regard, therefore, to ordinances in general, the Revised Charter of the City of Manila is doubtless dominant, but, that dominant force loses its continuity when it approaches the realm of "ordinances levying or imposing taxes, fees or other charges" in particular. There, the Local Tax Code controls. Here, as always, a general provision must give way to a particular provision. 3 Special provision governs. 4 This is especially true where the law containing the particular provision was enacted later than the one containing the general provision. The City Charter of Manila was promulgated on June 18, 1949 as against the Local Tax Code which was decreed on June 1, 1973. The law-making power cannot be said to have intended the establishment of conflicting and hostile systems upon the same subject, or to leave in force provisions of a prior law by which the new will of the legislating power may be thwarted and overthrown. Such a result would render legislation a useless and Idle ceremony, and subject the law to the reproach of uncertainty and unintelligibility. 5

The case of City of Manila v. Teotico 6 is opposite. In that case, Teotico sued the City of Manila for damages arising from the injuries he suffered when he fell inside an uncovered and unlighted catchbasin or manhole on P. Burgos Avenue. The City of Manila denied liability on the basis of the City Charter (R.A. 409) exempting the City of Manila from any liability for damages or injury to persons or property arising from the failure of the city officers to enforce the provisions of the charter or any other law or ordinance, or from negligence of the City Mayor, Municipal Board, or other officers while enforcing or attempting to enforce the provisions of the charter or of any other law or ordinance. Upon the other hand, Article 2189 of the Civil Code makes cities liable for damages for the death of, or injury suffered by any persons by reason of the defective condition of roads, streets, bridges, public buildings, and other public works under their control or supervision. On review, the Court held the Civil Code controlling. It is true that, insofar as its territorial application is concerned, the Revised City Charter is a special law and the subject matter of the two laws, the Revised City Charter establishes a general rule of liability arising from negligence in general, regardless of the object thereof, whereas the Civil Code constitutes a particularprescription for liability due to defective streets in particular. In the same manner, the Revised Charter of the City prescribes a rule for the publication of "ordinance" in general, while the Local Tax Code establishes a rule for the publication of "ordinance levying or imposing taxes fees or other charges in particular.In fact, there is no rule which prohibits the repeal even by implication of a special or specific act by a general or broad one. 7 A charter provision may be impliedly modified or superseded by a later statute, and where a statute is controlling, it must be read into the charter notwithstanding any particular charter provision. 8 A subsequent general law similarly applicable to all cities prevails over any conflicting charter provision, for the reason that a charter must not be inconsistent with the general laws and public policy of the state. 9 A chartered city is not an independent sovereignty. The state remains supreme in all matters not purely local. Otherwise stated, a charter must yield to the constitution and general laws of the state, it is to have read into it that general law which governs the municipal corporation and which the corporation cannot set aside but to which it must yield. When a city adopts a charter, it in effect adopts as part of its charter general law of such character. 10

2. The principle of exhaustion of administrative remedies is strongly asserted by petitioners as having been violated by private respondent in bringing a direct suit in court. This is because Section 47 of the Local Tax Code provides that any question or issue

raised against the legality of any tax ordinance, or portion thereof, shall be referred for opinion to the city fiscal in the case of tax ordinance of a city. The opinion of the city fiscal is appealable to the Secretary of Justice, whose decision shall be final and executory unless contested before a competent court within thirty (30) days. But, the petition below plainly shows that the controversy between the parties is deeply rooted in a pure question of law: whether it is the Revised Charter of the City of Manila or the Local Tax Code that should govern the publication of the tax ordinance. In other words, the dispute is sharply focused on the applicability of the Revised City Charter or the Local Tax Code on the point at issue, and not on the legality of the imposition of the tax. Exhaustion of administrative remedies before resort to judicial bodies is not an absolute rule. It admits of exceptions. Where the question litigated upon is purely a legal one, the rule does not apply. 11 The principle may also be disregarded when it does not provide a plain, speedy and adequate remedy. It may and should be relaxed when its application may cause great and irreparable damage. 12

3. It is maintained by private respondent that the subject ordinance is not a "tax ordinance," because the imposition of rentals, permit fees, tolls and other fees is not strictly a taxing power but a revenue-raising function, so that the procedure for publication under the Local Tax Code finds no application. The pretense bears its own marks of fallacy. Precisely, the raising of revenues is the principal object of taxation. Under Section 5, Article XI of the New Constitution, "Each local government unit shall have the power to create its own sources of revenue and to levy taxes, subject to such provisions as may be provided by law." 13 And one of those sources of revenue is what the Local Tax Code points to in particular: "Local governments may collect fees or rentals for the occupancy or use of public markets and premises * * *." 14 They can provide for and regulate market stands, stalls and privileges, and, also, the sale, lease or occupancy thereof. They can license, or permit the use of, lease, sell or otherwise dispose of stands, stalls or marketing privileges. 15

It is a feeble attempt to argue that the ordinance violates Presidential Decree No. 7, dated September 30, 1972, insofar as it affects livestock and animal products, because the said decree prescribes the collection of other fees and charges thereon "with the exception of ante-mortem and post-mortem inspection fees, as well as the delivery, stockyard and slaughter fees as may be authorized by the Secretary of Agriculture and Natural Resources." 16Clearly, even the exception clause of the decree itself permits the collection of the proper fees for livestock. And the Local Tax Code (P.D. 231, July 1, 1973) authorizes in its Section 31: "Local governments may collect fees for the slaughter of animals and the use of corrals * * * "4. The non-participation of the Market Committee in the enactment of Ordinance No. 7522 supposedly in accordance with Republic Act No. 6039, an amendment to the City Charter of Manila, providing that "the market committee shall formulate, recommend and adopt, subject to the ratification of the municipal board, and approval of the mayor, policies and rules or regulation repealing or maneding existing provisions of the market code" does not infect the ordinance with any germ of invalidity. 17 The function of the committee is purely recommendatory as the underscored phrase suggests, its recommendation is without binding effect on the Municipal Board and the City Mayor. Its prior acquiescence of an intended or proposed city ordinance is not a condition sine qua non before the Municipal Board could enact such ordinance. The native power of the Municipal Board to legislate remains undisturbed even in the slightest degree. It can move in its own initiative and the Market Committee cannot demur. At most, the Market Committee may serve as a legislative aide of the Municipal Board in the enactment of city ordinances affecting the city markets or, in plain words, in the gathering of the necessary data, studies and the collection of consensus for the proposal of ordinances regarding city markets. Much less could it be said that Republic Act 6039 intended to delegate to the Market Committee the adoption of regulatory measures for the operation and administration of the city markets. Potestas delegata non delegare potest.5. Private respondent bewails that the market stall fees imposed in the disputed ordinance are diverted to the exclusive private use of the Asiatic Integrated Corporation since the collection of said fees had been let by the City of Manila to the said corporation in a "Management and Operating Contract." The assumption is of course saddled on erroneous premise. The fees collected do not go direct to the private coffers of the corporation. Ordinance No. 7522 was not made for the corporation but for the purpose of raising revenues for the city. That is the object it serves. The entrusting of the collection of the fees does not destroy the public purpose of the ordinance. So long as the purpose is public, it does not matter whether the agency through which the money is dispensed is public or private. The right to tax depends upon the ultimate use, purpose and object for which the fund is raised. It is not dependent on the nature or character of the person or corporation whose intermediate agency is to be used in applying it. The people may be taxed for a public purpose, although it be under the direction of an individual or private corporation. 18

Nor can the ordinance be stricken down as violative of Section 3(e) of the Anti-Graft and Corrupt Practices Act because the increased rates of market stall fees as levied by the ordinance will necessarily inure to the unwarranted benefit and advantage of the corporation. 19 We are concerned only with the issue whether the ordinance in question is intra vires. Once determined in the affirmative, the measure may not be invalidated because of consequences that may arise from its enforcement. 20

ACCORDINGLY, the decision of the court below is hereby reversed and set aside. Ordinance No. 7522 of the City of Manila, dated June 15, 1975, is hereby held to have been validly enacted. No. costs.

Pascual vs secretary of public works and communication"A law appropriating the public revenue is invalid if the public advantage or benefit, derived from such expenditure, is merely

incidental in the promotion of a particular enterprise."FACTS: Governor Wenceslao Pascual of Rizal instituted this action for declaratory relief, with injunction, upon the ground that RA No. 920, which apropriates funds for public works particularly for the construction and improvement of Pasig feeder road terminals. Some of the feeder roads, however, as alleged and as contained in the tracings attached to the petition, were nothing but projected and planned subdivision roads, not yet constructed within the Antonio Subdivision, belonging to private respondent Zulueta,

situated at Pasig, Rizal; and which projected feeder roads do not connect any government property or any important premises to the main highway. The respondents' contention is that there is public purpose because people living in the subdivision will directly be benefitted from the construction of the roads, and the government also gains from the donation of the land supposed to be occupied by the streets, made by its owner to the government.ISSUE: Should incidental gains by the public be considered "public purpose" for the purpose of justifying an expenditure of the government?HELD: No. It is a general rule that the legislature is without power to appropriate public revenue for anything but a public purpose. It is the essential character of the direct object of the expenditure which must determine its validity as justifying a tax, and not the magnitude of the interest to be affected nor the degree to which the general advantage of the community, and thus the public welfare, may be ultimately benefited by their promotion. Incidental to the public or to the state, which results from the promotion of private interest and the prosperity of private enterprises or business, does not justify their aid by the use public money. The test of the constitutionality of a statute requiring the use of public funds is whether the statute is designed to promote the public interest, as opposed to the furtherance of the advantage of individuals, although each advantage to individuals might incidentally serve the public.

WENCESLAO PASCUAL, in his official capacity as Provincial Governor of Rizal vs. THE SECRETARY OF PUBLIC WORKS AND COMMUNICATIONS, ET AL

Appeal, by petitioner Wenceslao Pascual, from a decision of the Court of First Instance of Rizal, dismissing the above entitled case and dissolving the writ of preliminary injunction therein issued, without costs.On August 31, 1954, petitioner Wenceslao Pascual, as Provincial Governor of Rizal, instituted this action for declaratory relief, with injunction, upon the ground that Republic Act No. 920, entitled "An Act Appropriating Funds for Public Works", approved on June 20, 1953, contained, in section 1-C (a) thereof, an item (43[h]) of P85,000.00 "for the construction, reconstruction, repair, extension and improvement" of Pasig feeder road terminals (Gen. Roxas — Gen. Araneta — Gen. Lucban — Gen. Capinpin — Gen. Segundo — Gen. Delgado — Gen. Malvar — Gen. Lim)"; that, at the time of the passage and approval of said Act, the aforementioned feeder roads were "nothing but projected and planned subdivision roads, not yet constructed, . . . within the Antonio Subdivision . . . situated at . . . Pasig, Rizal" (according to the tracings attached to the petition as Annexes A and B, near Shaw Boulevard, not far away from the intersection between the latter and Highway 54), which projected feeder roads "do not connect any government property or any important premises to the main highway"; that the aforementioned Antonio Subdivision (as well as the lands on which said feeder roads were to be construed) were private properties of respondent Jose C. Zulueta, who, at the time of the passage and approval of said Act, was a member of the Senate of the Philippines; that on May, 1953, respondent Zulueta, addressed a letter to the Municipal Council of Pasig, Rizal, offering to donate said projected feeder roads to the municipality of Pasig, Rizal; that, on June 13, 1953, the offer was accepted by the council, subject to the condition "that the donor would submit a plan of the said roads and agree to change the names of two of them"; that no deed of donation in favor of the municipality of Pasig was, however, executed; that on July 10, 1953, respondent Zulueta wrote another letter to said council, calling attention to the approval of Republic Act. No. 920, and the sum of P85,000.00 appropriated therein for the construction of the projected feeder roads in question; that the municipal council of Pasig endorsed said letter of respondent Zulueta to the District Engineer of Rizal, who, up to the present "has not made any endorsement thereon" that inasmuch as the projected feeder roads in question were private property at the time of the passage and approval of Republic Act No. 920, the appropriation of P85,000.00 therein made, for the construction, reconstruction, repair, extension and improvement of said projected feeder roads, was illegal and, therefore, void ab initio"; that said appropriation of P85,000.00 was made by Congress because its members were made to believe that the projected feeder roads in question were "public roads and not private streets of a private subdivision"'; that, "in order to give a semblance of legality, when there is absolutely none, to the aforementioned appropriation", respondents Zulueta executed on December 12, 1953, while he was a member of the Senate of the Philippines, an alleged deed of donation — copy of which is annexed to the petition — of the four (4) parcels of land constituting said projected feeder roads, in favor of the Government of the Republic of the Philippines; that said alleged deed of donation was, on the same date, accepted by the then Executive Secretary; that being subject to an onerous condition, said donation partook of the nature of a contract; that, such, said donation violated the provision of our fundamental law prohibiting members of Congress from being directly or indirectly financially interested in any contract with the Government, and, hence, is unconstitutional, as well as null and void ab initio, for the construction of the projected feeder roads in question with public funds would greatly enhance or increase the value of the aforementioned subdivision of respondent Zulueta, "aside from relieving him from the burden of constructing his subdivision streets or roads at his own expense"; that the construction of said projected feeder roads was then being undertaken by the Bureau of Public Highways; and that, unless restrained by the court, the respondents would continue to execute, comply with, follow and implement the aforementioned illegal provision of law, "to the irreparable damage, detriment and prejudice not only to the petitioner but to the Filipino nation."

Petitioner prayed, therefore, that the contested item of Republic Act No. 920 be declared null and void; that the alleged deed of donation of the feeder roads in question be "declared unconstitutional and, therefor, illegal"; that a writ of injunction be issued enjoining the Secretary of Public Works and Communications, the Director of the Bureau of Public Works and Highways and Jose C. Zulueta from ordering or allowing the continuance of the above-mentioned feeder roads project, and from making and securing any new and further releases on the aforementioned item of Republic Act No. 920, and the disbursing officers of the Department of Public Works and Highways from making any further payments out of said funds provided for in Republic Act No. 920; and that pending final hearing on the merits, a writ of preliminary injunction be issued enjoining the aforementioned parties

respondent from making and securing any new and further releases on the aforesaid item of Republic Act No. 920 and from making any further payments out of said illegally appropriated funds.

Respondents moved to dismiss the petition upon the ground that petitioner had "no legal capacity to sue", and that the petition did "not state a cause of action". In support to this motion, respondent Zulueta alleged that the Provincial Fiscal of Rizal, not its provincial governor, should represent the Province of Rizal, pursuant to section 1683 of the Revised Administrative Code; that said respondent is " not aware of any law which makes illegal the appropriation of public funds for the improvements of . . . private property"; and that, the constitutional provision invoked by petitioner is inapplicable to the donation in question, the same being a pure act of liberality, not a contract. The other respondents, in turn, maintained that petitioner could not assail the appropriation in question because "there is no actual bona fide case . . . in which the validity of Republic Act No. 920 is necessarily involved" and petitioner "has not shown that he has a personal and substantial interest" in said Act "and that its enforcement has caused or will cause him a direct injury."

Acting upon said motions to dismiss, the lower court rendered the aforementioned decision, dated October 29, 1953, holding that, since public interest is involved in this case, the Provincial Governor of Rizal and the provincial fiscal thereof who represents him therein, "have the requisite personalities" to question the constitutionality of the disputed item of Republic Act No. 920; that "the legislature is without power appropriate public revenues for anything but a public purpose", that the instructions and improvement of the feeder roads in question, if such roads where private property, would not be a public purpose; that, being subject to the following condition:

The within donation is hereby made upon the condition that the Government of the Republic of the Philippines will use the parcels of land hereby donated for street purposes only and for no other purposes whatsoever; it being expressly understood that should the Government of the Republic of the Philippines violate the condition hereby imposed upon it, the title to the land hereby donated shall, upon such violation, ipso facto revert to the DONOR, JOSE C. ZULUETA. (Emphasis supplied.)which is onerous, the donation in question is a contract; that said donation or contract is "absolutely forbidden by the Constitution" and consequently "illegal", for Article 1409 of the Civil Code of the Philippines, declares in existence and void from the very beginning contracts "whose cause, objector purpose is contrary to law, morals . . . or public policy"; that the legality of said donation may not be contested, however, by petitioner herein, because his "interest are not directly affected" thereby; and that, accordingly, the appropriation in question "should be upheld" and the case dismissed.

At the outset, it should be noted that we are concerned with a decision granting the aforementioned motions to dismiss, which as much, are deemed to have admitted hypothetically the allegations of fact made in the petition of appellant herein. According to said petition, respondent Zulueta is the owner of several parcels of residential land situated in Pasig, Rizal, and known as the Antonio Subdivision, certain portions of which had been reserved for the projected feeder roads aforementioned, which, admittedly, were private property of said respondent when Republic Act No. 920, appropriating P85,000.00 for the "construction, reconstruction, repair, extension and improvement" of said roads, was passed by Congress, as well as when it was approved by the President on June 20, 1953. The petition further alleges that the construction of said roads, to be undertaken with the aforementioned appropriation of P85,000.00, would have the effect of relieving respondent Zulueta of the burden of constructing his subdivision streets or roads at his own expenses, 1and would "greatly enhance or increase the value of the subdivision" of said respondent. The lower court held that under these circumstances, the appropriation in question was "clearly for a private, not a public purpose."

Respondents do not deny the accuracy of this conclusion, which is self-evident. 2However, respondent Zulueta contended, in his motion to dismiss that:

A law passed by Congress and approved by the President can never be illegal because Congress is the source of all laws . . . Aside from the fact that movant is not aware of any law which makes illegal the appropriation of public funds for the improvement of what we, in the meantime, may assume as private property . . . (Record on Appeal, p. 33.)

The first proposition must be rejected most emphatically, it being inconsistent with the nature of the Government established under the Constitution of the Republic of the Philippines and the system of checks and balances underlying our political structure. Moreover, it is refuted by the decisions of this Court invalidating legislative enactments deemed violative of the Constitution or organic laws. 3

As regards the legal feasibility of appropriating public funds for a public purpose, the principle according to Ruling Case Law, is this:It is a general rule that the legislature is without power to appropriate public revenue for anything but a public purpose. . . . It is the essential character of the direct object of the expenditure which must determine its validity as justifying a tax, and not the magnitude of the interest to be affected nor the degree to which the general advantage of the community, and thus the public welfare, may be ultimately benefited by their promotion. Incidental to the public or to the state, which results from the promotion of private interest and the prosperity of private enterprises or business, does not justify their aid by the use public money. (25 R.L.C. pp. 398-400; Emphasis supplied.)The rule is set forth in Corpus Juris Secundum in the following language:

In accordance with the rule that the taxing power must be exercised for public purposes only, discussedsupra sec. 14, money raised by taxation can be expended only for public purposes and not for the advantage of private individuals. (85 C.J.S. pp. 645-646; emphasis supplied.)Explaining the reason underlying said rule, Corpus Juris Secundum states:

Generally, under the express or implied provisions of the constitution, public funds may be used only for public purpose. The right of the legislature to appropriate funds is correlative with its right to tax, and, under constitutional provisions against taxation except for public purposes and prohibiting the collection of a tax for one purpose and the devotion thereof to another purpose, no appropriation of state funds can be made for other than for a public purpose.x x x x x x x x x

The test of the constitutionality of a statute requiring the use of public funds is whether the statute is designed to promote the public interest, as opposed to the furtherance of the advantage of individuals, although each advantage to individuals might incidentally serve the public. (81 C.J.S. pp. 1147; emphasis supplied.)

Needless to say, this Court is fully in accord with the foregoing views which, apart from being patently sound, are a necessary corollary to our democratic system of government, which, as such, exists primarily for the promotion of the general welfare. Besides, reflecting as they do, the established jurisprudence in the United States, after whose constitutional system ours has been patterned, said views and jurisprudence are, likewise, part and parcel of our own constitutional law. lawphil.net

This notwithstanding, the lower court felt constrained to uphold the appropriation in question, upon the ground that petitioner may not contest the legality of the donation above referred to because the same does not affect him directly. This conclusion is, presumably, based upon the following premises, namely: (1) that, if valid, said donation cured the constitutional infirmity of the aforementioned appropriation; (2) that the latter may not be annulled without a previous declaration of unconstitutionality of the said donation; and (3) that the rule set forth in Article 1421 of the Civil Code is absolute, and admits of no exception. We do not agree with these premises.

The validity of a statute depends upon the powers of Congress at the time of its passage or approval, not upon events occurring, or acts performed, subsequently thereto, unless the latter consists of an amendment of the organic law, removing, with retrospective operation, the constitutional limitation infringed by said statute. Referring to the P85,000.00 appropriation for the projected feeder roads in question, the legality thereof depended upon whether said roads were public or private property when the bill, which, latter on, became Republic Act 920, was passed by Congress, or, when said bill was approved by the President and the disbursement of said sum became effective, or on June 20, 1953 (see section 13 of said Act). Inasmuch as the land on which the projected feeder roads were to be constructed belonged then to respondent Zulueta, the result is that said appropriation sought a private purpose, and hence, was null and void. 4 The donation to the Government, over five (5) months after the approval and effectivity of said Act, made, according to the petition, for the purpose of giving a "semblance of legality", or legalizing, the appropriation in question, did not cure its aforementioned basic defect. Consequently, a judicial nullification of said donation need not precede the declaration of unconstitutionality of said appropriation.

Again, Article 1421 of our Civil Code, like many other statutory enactments, is subject to exceptions. For instance, the creditors of a party to an illegal contract may, under the conditions set forth in Article 1177 of said Code, exercise the rights and actions of the latter, except only those which are inherent in his person, including therefore, his right to the annulment of said contract, even though such creditors are not affected by the same, except indirectly, in the manner indicated in said legal provision.

Again, it is well-stated that the validity of a statute may be contested only by one who will sustain a direct injury in consequence of its enforcement. Yet, there are many decisions nullifying, at the instance of taxpayers, laws providing for the disbursement of public funds, 5upon the theory that "the expenditure of public funds by an officer of the State for the purpose of administering an unconstitutional act constitutes a misapplication of such funds," which may be enjoined at the request of a taxpayer. 6Although there are some decisions to the contrary, 7the prevailing view in the United States is stated in the American Jurisprudence as follows:

In the determination of the degree of interest essential to give the requisite standing to attack the constitutionality of a statute, the general rule is that not only persons individually affected, but alsotaxpayers, have sufficient interest in preventing the illegal expenditure of moneys raised by taxation and may therefore question the constitutionality of statutes requiring expenditure of public moneys. (11 Am. Jur. 761; emphasis supplied.)

However, this view was not favored by the Supreme Court of the U.S. in Frothingham vs. Mellon (262 U.S. 447), insofar as federal laws are concerned, upon the ground that the relationship of a taxpayer of the U.S. to its Federal Government is different from that of a taxpayer of a municipal corporation to its government. Indeed, under the composite system of government existing in the U.S., the states of the Union are integral part of the Federation from an international viewpoint, but, each state enjoys internally a substantial measure of sovereignty, subject to the limitations imposed by the Federal Constitution. In fact, the same was made by representatives ofeach state of the Union, not of the people of the U.S., except insofar as the former represented the people of the respective States, and the people of each State has, independently of that of the others, ratified said Constitution. In other words, the Federal Constitution and the Federal statutes have become binding upon the people of the U.S. in consequence of an act of, and, in this sense, through the respective states of the Union of which they are citizens. The peculiar nature of the relation between said people and the Federal Government of the U.S. is reflected in the election of its President, who is chosen directly, not by the people of the U.S., but by electors chosen by each State, in such manner as the legislature thereof may direct (Article II, section 2, of the Federal Constitution).lawphi1.net

The relation between the people of the Philippines and its taxpayers, on the other hand, and the Republic of the Philippines, on the other, is not identical to that obtaining between the people and taxpayers of the U.S. and its Federal Government. It is closer, from a domestic viewpoint, to that existing between the people and taxpayers of each state and the government thereof, except that the authority of the Republic of the Philippines over the people of the Philippines is more fully direct than that of the states of the Union, insofar as the simple and unitarytype of our national government is not subject to

limitations analogous to those imposed by the Federal Constitution upon the states of the Union, and those imposed upon the Federal Government in the interest of the Union. For this reason, the rule recognizing the right of taxpayers to assail the constitutionality of a legislation appropriating local or state public funds — which has been upheld by the Federal Supreme Court (Crampton vs.Zabriskie, 101 U.S. 601) — has greater application in the Philippines than that adopted with respect to acts of Congress of the United States appropriating federal funds.

Indeed, in the Province of Tayabas vs. Perez (56 Phil., 257), involving the expropriation of a land by the Province of Tayabas, two (2) taxpayers thereof were allowed to intervene for the purpose of contesting the price being paid to the owner thereof, as unduly exorbitant. It is true that in Custodio vs. President of the Senate (42 Off. Gaz., 1243), a taxpayer and employee of the Government was not permitted to question the constitutionality of an appropriation for backpay of members of Congress. However, in Rodriguez vs. Treasurer of the Philippines and Barredo vs. Commission on Elections (84 Phil., 368; 45 Off. Gaz., 4411), we entertained the action of taxpayers impugning the validity of certain appropriations of public funds, and invalidated the same. Moreover, the reason that impelled this Court to take such position in said two (2) cases — the importance of the issues therein raised — is present in the case at bar. Again, like the petitioners in the Rodriguez and Barredo cases, petitioner herein is not merely a taxpayer. The Province of Rizal, which he represents officially as its Provincial Governor, is our most populated political subdivision, 8and, the taxpayers therein bear a substantial portion of the burden of taxation, in the Philippines.Hence, it is our considered opinion that the circumstances surrounding this case sufficiently justify petitioners action in contesting the appropriation and donation in question; that this action should not have been dismissed by the lower court; and that the writ of preliminary injunction should have been maintained.

Wherefore, the decision appealed from is hereby reversed, and the records are remanded to the lower court for further proceedings not inconsistent with this decision, with the costs of this instance against respondent Jose C. Zulueta. It is so ordered.

Meralco v Yatco GR No. 45697, November 1, 1939

FACTS: Meralco entered into an insurance contract with a new york based insurance company. Yatco, the Commissioner of Internal Revenue, levied taxes on the premium paid. Meralco paid under protest alleging that the Philippines had not jurisdiction. ISSUE: Whether the CIR exceeded his powers in taxing Meralco’s paid premium RULING: No. Where the risk insured against and certain incidents of the contract are to be attended in the Philippines such as payment of dividends when received in cash, the Philippines may impose tax regardless whether the contract is executed abroad. Under such circumstances, substantial elements of the contract may be said to be so situated in the Philippines as to give its government the power to tax. Even if it be assumed that the tax imposed upon the insured will ultimately be passed on to the insurer, thus constituting an indirect tax upon the foreign corporation, by stipulations of its contract, has subjected itself to the taxing jurisdiction of the Philippines. After all, the Government of the Philippines, by protecting the properties insured, benefits the foreign corporation. It is thus reasonable that the latter should pay a just contribution therefor.

MANILA ELECTRIC COMPANY, vs.A.L. YATCO, Collector of Internal RevenueIn 1935, plaintiff Manila Electric Company, a corporation organized and existing under the laws of the Philippines, with its

principal office and place of business in the City of Manila, insured with the city of New York Insurance Company and the United States Guaranty Company, certain real and personal properties situated in the Philippines. The insurance was entered into in behalf of said plaintiff by its broker in New York City. The insurance companies are foreign corporations not licensed to do business in the Philippines and having no agents therein. The policies contained provisions for the settlement and payment of losses upon the occurence of any risk insured against, a sample of which is policy No. 20 of the New York insurance Company attached to and made an integral part of the agreed statement of facts.

Plaintiff through its broker paid, in New York, to said insurance company premiums in the sum of P91,696. The Collector of Internal Revenue, under the authority of section 192 of act No. 2427, as amended, assessed and levied a tax of one per centum on said premiums, which plaintiff paid under protest. The protest having been overruled, plaintiff instituted the present action to recover the tax. The trial court dismissed the complaint, and from the judgment thus rendered, plaintiff took the instant appeal.The pertinent portions of the Act here involved read:SEC. 192. It shall be unlawful for any person, company or corporation, or forward applications for insurance in or to issue or to deliver or accept policies of or for any company or companies not having been legally authorized to transact business in the Philippine Islands, as provided in this chapter; and any such person, company or corporation violating the provisions of this section shall be deemed guilty of a penal offense, and upon conviction thereof, shall for each such offense be punished by a fine of two hundred pesos, or imprisonment for two months, or both in the discretion not authorized to transact business in the Philippine Island may be placed upon terms and conditions as follows:x x x x x x x x x. . . . And provided further, that the prohibitions of this section shall not affect the right of an owner of property to apply for and obtain for himself policies in foreign companies in cases were said owner does not make use of the services of any agent, company or corporation residing or doing business in the Philippine Islands. In all case where owners of property obtain insurance directly

with foreign companies, it shall be the duty of said owners to report to the insurance commissioner and to the Collector of Internal Revenue each case where insurance has been so effected, and shall pay the tax of one per centum on premium paid, in the manner required by law of insurance companies, and shall be subject to the same penalties for failure to do so.Appellant maintains that the second paragraph of the provisions of the Act aforecited is unconstitutional, and has been so declared by the Supreme Court of the United States in the case of Compania General de Tabacos v. Collector of Internal Revenue, 275 U.S., 87, 48 Sup. Ct. Rep., 100, 72 Law. ed., 177.

The case relied upon involves a suit to recover from the Collector of Internal Revenue certain taxes in connection with insurance premiums which the Tobacco Barcelona, Spain, paid to the Guardian Insurance Company of London, England, and to Le Comite des Assurances Maritimes de Paris, of Paris, France. The Tobacco Company, through its head office in Barcelona, insured against fire with the London Company the merchandise it had in deposit in the warehouse in the Philippines. As the merchandise were from time to time shipped to Europe, the head office at Barcelona insured the same with the Paris Company against marine risks while such merchandise were in transit from the Philippines to Spain. The London Company, unlike the Paris Company, was licensed to do insurance business in the Philippines and had an agent therein. Losses, if any, on policies were to be paid to the Tobacco Company in Paris. The tax assessed and levied by the Collector of Internal Revenue, under the same law now involved, was challenged as unconstitutional. The Supreme Court of the united States sustained the tax with respect to premiums paid to the London Company and held it erroneous with respect to premiums paid to the Paris Company.lawphi1.netThe factual basis upon which the imposition of the tax on premiums paid to the Paris Company was declared erroneous, is stated by the Supreme Court of the United States thus:

Coming then to the tax on the premiums paid to the Paris Company the contract of insurance on which the premium was paid was made at Barcelona in Spain, the headquarters of the Tobacco Company between the Tobacco Company and the Paris Company, and any losses arising thereunder were to be paid in Paris. The Paris Company had no communication whatever with anyone in the Philippine Islands. The collection of this tax involves an ex-action upon a company of Spain lawfully doing business in the Philippine Islands effected by reason of a contract made by that company with a company in Paris on merchandise shipped from the Philippine Islands for delivery in Barcelona. It is an imposition upon a contract not made in the Philippines and having no situs there and to be measured by money paid as premiums in Paris, with the place of payment of loss, if any, in Paris. We are very clear that the contract and the premiums paid under it are not within the jurisdiction of the government of the Philippine Islands.And, upon the authority of the cases of Allgeyer v. Lousiana, 165 U.S., 578, 41 Law. ed., 832, and St. Louis Cotton Compress Company v. Arkansas, 250 U.S., 346, 677 Law. ed., 279, the Supreme Court of the United States held that "as the state is forbidden to deprive a person of his liberty without due process of law, it may not compel anyone within its jurisdiction to pay tribute to it for contracts or money paid to secure the benefits of contract made and to be performed outside of the state."On the other hand, the Supreme Court of the United States, in sustaining the imposition of the tax upon premiums paid by the assured to the London Company, says:. . . . Does the fact that while the Tobacco Company and the London Company were within the jurisdiction of the Philippines they made a contract outside of the Philippines, prevent the imposition upon the assured of a tax of 1 per cent upon the money paid by it as a premium to the London Company? We may properly assume that this tax placed upon the assured must ultimately be paid by the insurer, and treating its real incidence as such, the question arises whether making and carrying out the policy does not involve an exercise or use of the right of the London Company to do business in the Philippine Islands under its license, because the policy covers fire risks no property within the Philippine Islands which may require adjustment and the activities of agents in the Philippine Islands with respect to settlement of losses arising thereunder. This we think must be answered affirmatively under Equitable Life Assur. Soc. v. Pennsylvania, 238 U.S., 143 Law. ed., 1239, 35 Sup. Ct. Rep., 829. The case is a close one, but in deference to the conclusion we reached in the latter case, we affirm the judgment of the court below in respect to the tax upon the premium paid to the London Company.

The ruling in the Paris Company case is obviously not applicable in the instant one, for there, not only was the contract executed in a foreign country, but the merchandise insured was in transit from the Philippines to Spain, and nothing was to be done in the Philippines in pursuance of the contract. However, the rule laid down in connection with the London Company may, by analogy, be applied in the present case, the essential facts of both cases being similar. Here, the insured is a corporation organized under the laws of the Philippines, its principal office and place of business being in the City of Manila. The New York Insurance Company and the United States Guaranty Company may be said to be doing policies issued by them cover risks on properties within the Philippines, which may require adjustment and the activities of agents in the Philippines with respect to the settlement of losses arising thereunder. For instance, it is therein stipulated that "the insured, as often as may be reasonably required, shall exhibit to any person designated by the company all the remains of any property therein described and submit to examination under oath by any person named by the company, and as often as may be reasonably required, shall exhibit to any person designated by the company all the remains of any property therein described and submit to an examination all books of accounts . . . at such reasonable time and place as may be designated by the company or its representative." And, in case of disagreement as to the amount of losses or damages as to require the appointment of appraisers, the insurance contract provides that "the appraisers shall first select a competent umpire; and failure for fifteen days to agree to such umpire, then, on request of the insured or of the company, such umpire shall be selected by a judge of the court of record in the state in which the property insured is located.".True it is that the London Company had a license to do business in the Philippines, but this fact was not a decisive factor in the decision of that case, for reliance was therein placed on the Equitable Life Assurance Society v. Pennsylvania, 238 U.S., 143, 59 Law. ed., 1239, 35 Sup. Ct. Rep., 829, wherein it was said that "the Equitable Society was doing business in Pennsylvania when it was

annually paying the dividends in Pennsylvania or sending an adjuster into the state in case of dispute or making proof of death," and therefore "the taxpayer had subjected itself to the jurisdiction of Pennsylvania in doing business there." (See Compañia General de Tabacos v. Collector of Internal Revenue, 275 U.S., 87, 72 Law. ed., 177, 182.)

The controlling consideration, therefore, in the decision of the London Company case was that said company, by making and carrying out policies covering risks located in this country which might require adjustment or the making of proof of loss therein, did business in the Philippines and subjected itself to its jurisdiction, a rule that can perfectly be applied in the present case to the new York Insurance Company and the United States Guaranty Company.It is argued, however, that the sending of an unjuster to the Philippines to fix the amount of losses, is a mere contingency and not an actual fact, as such, it cannot be a ground for holding that the insurance companies subjected themselves to the taxing jurisdiction of the Philippines. This argument could have been made in the London Company case where no adjuster appears to have ever been sent to the Philippines nor any adjustment ever made, and yet the stipulations to that effect were held to be sufficient to bring the foreign corporation within the taxing jurisdiction of the Philippines.

In epitome, then, the whole question involved in this appeal is whether or not the disputed tax is one imposed by the Commonwealth of the Philippines upon a contract beyond its jurisdiction. We are of the opinion and so hold that where the insured against also within the Philippines, the risk insured against also within the Philippines, and certain incidents of the contract are to be attended to in the Philippines, such as, payment of dividends when received in cash, sending of an unjuster into the Philippines in case of dispute, or making of proof of loss, the Commonwealth of the Philippines has the power to impose the tax upon the insured, regardless of whether the contract is executed in a foreign country and with a foreign corporation. Under such circumstances, substantial elements of the contract may be said to be so situated in the Philippines as to give its government the power to tax. And, even if it be assumed that the tax imposed upon the insured will ultimately be passed on the insurer, thus constituting an indirect tax upon the foreign corporation, it would still be valid, because the foreign corporation, by the stipulations of its contract, has subjected itself to the taxing jurisdiction of the Philippines. After all, Commonwealth of the Philippines, by protecting the properties insured, benefits the foreign corporation, and it is but reasonable that the latter should pay a just contribution therefor. It would certainly be a discrimination against domestic corporations to hold the tax valid when the policy is given by them and invalid when issued by foreign corporations.